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\PITALISM 
VS. 

BOLSHEVISM 




GEORGE L.WALKER 



CAPITALISM 

VS. 

BOLSHEVISM 



IS; 
773 



BY 

GEORGE L. WALKER 



Editor 

Boston Commercial 

Author, Capital, 
Walker's Copper Letter, Etc., Etc. 



Copyright, 1919, by Dukelow & Walker & Co. 



DUKELOW & WALKER CO., Publishers 
246 Washington St., Boston, Mass. 



CONTENTS. 






Chapter * Page 

Introduction 1 

I The System 6 

II Capital . 30 

III Overproduction 37 

IV War Lessons 43 

V A Protective Tariff 51 

VI Wages 70 

VII Bolshevism . .' 85 

VIII Discontent 99 

IX Profits and Interest 107 

X The Corporation 115 

XI Wall Street 118 

XII Money 125 

XIII Taxation 129 

XIV Luxuries 135 

XV Our Opportunity 143 

.A5L5697 

MAY 29 I9W 
j 



INTRODUCTION 

My previous booklet, CAPITAL, written 
and published in 1914, was accorded a reception 
which convinced me that great numbers of peo- 
ple were interested deeply in the analysis and 
explanation of our present system of industry 
therein presented. Recently there has been a 
strong revival of the demand for it. As the last 
edition has been exhausted, and as many of my 
friends have urged me to write again in the 
more brilliant light which the great war has 
thrown upon the economics of national life, I 
have violated the eight-hour regulation and 
turned out the material that follows. 

It has been my plan to tell my story in lan- 
guage that all can understand, to employ a style 
conducive to easy reading and to write precisely 
what I know and believe to be true, without 
equivocation. The reader will not find it a-long- 
drawn-out argumentative discussion. If any- 
thing, it is too short. But I believed it best to 



2 Capitalism vs. Bolshevism 

keep it within the limit of a single evening's 
reading. 

In these days when the extreme socialists, 
known there as the bolsheviki, are undertaking 
to force all Russians to accept their outrageous 
and impracticable social scheme by murdering 
those who disagree, and meanwhile dragging 
the whole population of Russia steadily down- 
ward from want to starvation; and when the 
propaganda of bolshevism is being carried on 
actively in this and every other country, it cer- 
tainly is desirable that something be written 
and published which will make clear to the wage 
earner and the farmer, and also to the business 
man and the capitalist, the nature and character 
of the so-called capitalistic system of industry. 

By devoting a great deal of my time during 
the past 20 years to the work of examining and 
valuing mining properties, and also a variety 
of other industrial enterprises, I have become 
impressed that the average man has a rather 
hazy knowledge of what is really going on in the 
world beyond the limits of his personal vision. 
Although I have become well acquainted with 
hundreds of miners, I never met more than two 
or three who had a clear idea of the value and 



Introduction 3 

importance of the mine in which they worked. 
The one employed in a rich stope is prone to 
think it the greatest mine in existence, and an- 
other who is helping drive a connection through 
barren rock usually is convinced that the prop- 
erty is well nigh valueless. 

Capitalism has been camouflaged and mis- 
represented until hardly anybody knows where 
it is or what it is. It needs to be explained to 
the people who are the most intimately asso- 
ciated with it. When it is understood sane and 
rational thinking people never can be induced 
to exchange it for any other social and indus- 
trial system, there will be a general disposition 
to lose faith in the witch-doctor charms of the 
socialists and bolshevists and to turn to reme- 
dies that have been tried and proved. 

Although a liar is almost as unpopular as a 
person with a contagious disease, the truth is 
not anywhere near as popular as might be de- 
sired. To illustrate, a library in a town near 
Boston, the report of which is now before me, 
circulated 28,743 books of fiction last year and 
only 2,330 of history. The appeal of the good 
story is largely responsible for the spread of 
bolshevism, the advocates of which, never per- 



4 Capitalism vs. Bolshevism 

mitting themselves to be restrained or even in- 
fluenced by facts, always are ready to stretch, 
compress, bend or twist their doctrine if they 
thereby may hope to bring more converts to 
their fold. 

Capitalism, however, is by far the most 
wonderful, astonishing and thrilling of all man's 
creations. Here in the United States where it 
has reached its highest development evidence 
is immediately at hand to confirm every truth- 
ful statement that is made concerning it. We 
Americans have the best of reasons to be proud 
of our capitalism, and the time has come for us 
to declare our faith. The tens of millions of 
socialist and bolshevik publications that are 
being circulated every year have made a dis- 
eased state of mentality more or less prevalent 
to which the tonic of truth must be adminis- 
tered. 

I have every confidence in the great com- 
mon people and in their high standard of in- 
telligence. I know that they would be quick to 
discover it if I tried to fool them. All Ameri- 
cans are interested in the same things, personal 
liberty, increasing opportunities for the indi- 
vidual, continuous prosperity and steadily im- 



Introduction 5 

proving standards of living. I have written to 
promote these good objects and to resist the in- 
fluences which are being exerted to destroy 
them. 

THE AUTHOR. 



Chapter I 
THE SYSTEM 

Before we decide to join the bolsheviki the 
syndicalists or the socialists, we should make 
sure that we thoroughly understand a long list 
of things, the two most important of which are 
the present system, which they propose to throw 
into the discard, and the new system of society 
which those organizations are planning to es- 
tablish. 

It is not good business to throw anything 
away until you are satisfied that it is worn out, 
unfitted for the purpose intended, no longer in 
style or in every way valueless. On the other 
hand, it is not good judgment to give your all 
for something new merely because the demon- 
strator or salesman is a plausible talker. You 
first should make sure you are getting your 
money's worth, that the new thing or arrange- 
ment is certain to bring you great benefit and 
happiness. 

The present system, called capitalism, is 



The System 7 

based upon personal initiative and effort, and 
the private ownership of property. It was a 
very simple system at the outset, but has grown 
more complicated as the wants and the purchas- 
ing power of the individual have increased. 
Now it has become difficult both to understand 
and to describe. 

Every country must have its industrial sys- 
tem, and the three prime factors of every in- 
dustrial system necessarily are production, dis- 
tribution and consumption. 

Ideals, theories, fads and all kinds of isms 
are secondary. First importance must be given 
to food, raiment and shelter, which make it pos- 
sible for people to live on the earth. These 
necessities of life have to be produced and dis- 
tributed before they are available for consump- 
tion. 

The work of production and distribution, 
regardless of the system or form of government, 
has to be done by the people. Nearly half of 
all the people now on the earth wrest their liv- 
ing from the soil almost with their bare hands, 
still using only the most primitive implements 
and tools; and approximately one-third of the 
world's people still depend upon muscle power, 



8 Capitalism vs. Bolshevism 

upon the backs and legs of mankind, for their 
transportation service. 

When a primitive man comes to own a 
horse, an ox or other beasts of burden he is a 
capitalist. He has stored up an amount of per- 
sonal effort, which he exerted in excess of that 
required to sustain life from day to day, and is 
able to draw upon that stored energy for assist- 
ance in the work of production and distribu- 
tion. 

After large numbers of men have obtained 
beasts of burden, fashioned vehicles, plows, etc., 
the productive capacity of the community in 
which they live is increased and transportation 
quickened. The capitalism of the United States 
is a higher development of this idea. To domes- 
tic animals it has added the most effective tools, 
machines of unending variety, and an immense 
volume of mechanical power, and has organized 
wonderfully efficient systems of production and 
distribution. 

A few of the resulting benefits will be 
mentioned. First, it has added so greatly to 
the volume of production and so quickened 
transportation as to make it possible for sev- 
eral times more people to live and support them- 



The System 

selves upon the earth; second, it has lightened 
human burdens and provided leisure and sur- 
plus which permit of the education of the young 
and the acquisition and enjoyment of a multi- 
tude of comforts, pleasures and luxuries, and 
third, it has opened up almost unlimited oppor- 
tunities to the children of the most humble to 
rise to positions of influence and wealth. 

Capitalism is a system that holds out 
strong inducements to the individual to strive 
for himself and family. It implants in the 
breast of every rational man a desire to earn 
save and accumulate property for himself and 
his children. Opportunities to accomplish these 
things are supplied galore. A great many men 
take advantage of some of the'se opportunities 
and as many more do not. 

Those who have neglected or overlooked 
their chances and those who have spent their 
earnings as they have gone along are likely to 
see life and the system from an entirely differ- 
ent viewpoint than those who have practised 
alertness, industry, self-denial, and exercised 
good judgment in the conduct of their own af- 
fairs. Men of the first two groups want to 
blame something for their failure and they pick 



10 Capitalism vs. Bolshevism 

on the system. Those in the last group attend 
to their own business and don't bother to reply- 
to the arguments or to deny the accusations put 
forth by the dissatisfied portion of the people, 
hence one side of the argument is heard from 
day to day and the other side rarely, if ever. 

Briefly, the savings and accumulations of 
the rich, the middle-classes and poor are in- 
vested in a great variety of industrial enter- 
prises. Men of genius and business capacity 
form organizations, chiefly corporations to em- 
ploy these savings productively so that they will 
earn interest and profits. Approximately 90% 
of all interest and profits is reinvested 
in industry. This method of utilizing savings 
in its highest development multiplies the pro- 
ductive power of hand labor, at least seven 
times over. More than three-quarters of the 
increased product thus gained necessarily goes 
to labor. 

When corporations are given encourage- 
ment and the principle of property right de- 
fended by the public, industrial expansion is 
rapid, labor is fully employed, wages are high, 
the people are prosperous and the volume of 
production is so large that the cost of living 



The System 11 

tends to decline gradually from year to year. 
During periods of reform agitation and legisla- 
tion, of assaults by the constituted government 
upon the right of property ownership, of strikes 
and other labor disturbances, savings are in- 
vested less freely, there is reduced expansion, 
business interests hesitate, production does not 
grow as rapidly as population and thus the cost 
of living advances. 

What the dissatisfied portion of the public 
doesn't understand is that interest and profits 
must be invested, that their investment in- 
creases the country's production, that the pro- 
duct must be sold and that a market for an ever- 
growing volume of output cannot be created ex- 
cept by permitting the prosperity and purchas- 
ing power of the working people to rise steadily 
from year to year. This increased purchasing 
power may come about through declining prices 
just as well as by wage advances. 

Capitalism is an evolution. It is an ag- 
gregation of age-old and newer truths which 
have been demonstrated to be practicable and 
trustworthy. It comprises the workable prin- 
ciples, methods and processes that all genera- 
tions of men from the beginning of time have 



12 Capitalism vs. Bolshevism 

discovered, developed and learned in their 
struggles for existence and in their dealings 
with one another. It is the concentrated busi- 
ness and social wisdom of all ages, the best of 
the experience of our ancestors, the part that 
could not be disregarded or discarded and which 
necessarily, therefore, has continued in use. 

Of course it is inconceivable that anybody 
should expect superior social and economic wis- 
dom to be evolved from the brain of "a seedy 
looking individual with unkempt hair and beard 
and clothing badly soiled who spent the most 
of his hours alone in the far corner of a low- 
ceilinged saloon over a stein of ale;" but in- 
creasing numbers of people have shown a dis- 
position to take their wisdom from such 
sources in recent years. Others are confident 
that true and trustworthy wisdom always is 
the child of experience. 

For a score of years past large numbers 
of irresponsible agitators have been striving 
untiringly to teach the ignorant, the thought- 
less, the weak-minded, the idle rich and the un- 
fortunate poor to hate capitalism; and the ef- 
forts of soap-box orators have been ably sec- 
onded by the "academic bolshevists, of whom 



The System 13 

our colleges and universities are altogether too 
full." 

Social-uplift, socialist and I. W. W. agita- 
tors — many of whom are innocently ignorant 
and the rest corrupt — have taught millions of 
working people to believe that capitalism robs 
the poor. Absurd as this proposition is on its 
very face, it has provoked widespread bitterness 
and antagonism and even been responsible for 
riots and revolutions. The penniless tramp de- 
clared that the only time he ever entertained 
fears that he might be robbed was when he was 
asleep and dreaming. A lot of our social reform 
agitators should try to wake up. 

Of course capitalism doesn't rob the poor. 
It can't. The poor have nothing of which to be 
robbed. Capitalism urges and assists the poor 
to better their condition. Both the capitalist 
and the worker thrive best when a very large 
volume of business is being done on a narrow 
margin of profit. Therefore capitalism is in- 
terested in following a line of development and 
progress that gives all labor constant employ- 
ment and large buying power. 

It is impossible to demonstrate exactly 
how much capitalism contributes to the work, 



14 Capitalism vs. Bolshevism 

or the volume, of production or how far it as- 
sists in distribution; but Bulletin 102, part 5, 
issued by the Smithsonian Institution, con- 
tains these estimates, first, that the amount of 
power in use in the United States is about 150,- 
000,000 horsepower, second, that this is equiva- 
lent to "the labor of three billion hard-working 
slaves." 

That the number of people engaged in 
gainful occupations in the United States is 40,- 
000,000 is a government estimate also. It 
would seem to follow, therefore, that capitalism 
is contributing 77 times more energy to the 
work of production and distribution than the 
wage earners are; yet it is impossible to show 
that capital receives as its share as much as 
20% of the benefits accruing. If the govern- 
ment estimates are not more than 25 times too 
high, indeed, even though they are 77 times too 
high, capitalism clearly is not to be spoken 
of as robbing labor. 

To follow this matter of power a bit fur- 
ther, it has been estimated that the farmers 
of America feed 40% of all they raise to their 
horses. For the limited benefit the farmers 
get from this rather awkward form of power 



• The System 15 

they apparently give up twice the proportion 
of their product that capitalism withholds from 
labor. Horses supply only a portion of the 
power requirements of farmers, as they do 
not help weave the cloth for his clothing, mill 
his grain, saw his lumber or draw the wire for 
his fences. 

Capitalism supplies power and facilities 
for which labor unhesitatingly would surrend- 
er half or two-thirds of its products provided 
they were unobtainable at lower prices. Cap- 
italism also pays for the plans, the organiza- 
tion and the management that double the ef- 
fectiveness of power and machinery, and 
charges only 10 or 20% of the product. Hasn't 
it been stated wrong all along? Isn't it labor 
robbing capital instead of capital robbing labor? 

Everybody is aware that capitalism has 
reached its highest development in the United 
States. Before the great war more than a mil- 
lion poor people were coming here from other 
lands every year. There was no such volume of 
emigration to any other country. Capitalism 
was creating here a heaven on earth for the 
poor, and the poor of the outside world were 
coming to take advantage of it as fast as they 



16 Capitalism vs. Bolshevism 

could get together the money to buy steamship 
tickets. 

One who has read and analyzed history has 
only to look about him to see and appreciate 
what capitalism has done for the people who 
work with their hands. It has made it possible 
for them to rise from slavery and serfdom to 
citizenship and independence, to obtain a con- 
tinuous and abundant supply of the best foods 
that land and ocean yield, enabled them to dress 
comfortably and in accordance with personal 
tastes, to occupy dwellings equipped with all 
modern improvements, and- provided educa- 
tional advantages and opportunities such as 
were not enjoyed even by the aristocracy as re- 
cently as a century ago. 

Before the great war capitalism had 
brought almost everything worth while within 
the reach of the American wage earner, includ- 
ing newspapers, magazines, books, music, gas 
and electric lights, telephones, phonographs, 
moving pictures, theatres, baseball, golf, travel 
on steamships, railroad trains and electric cars, 
and ownership of his home; and thousands of 
wage earners were riding to and from their 
work daily in their own automobiles. The 



The System 17 

working people of no other country in the 
world enjoyed these things to one-fifth the ex- 
tent that they did in the United States. Oppor- 
tunities to rise from the ordinary walks of life 
to the most honorable and highly compensated 
positions and to acquire fortunes were multi- 
plying and the sons of workingmen were fore- 
most in taking advantage of them. Ambition 
was encouraged and industry rewarded. 

Capitalism had accomplished all this while 
it was constantly under fire. The labor organi- 
zations claimed all credit for it, on the ground 
that their never-ending agitation and strikes 
for fewer hours and higher wages had made the 
working people prosperous. Every act of theirs 
had served to retard the progress of the Amer- 
ican people toward a more uniform prosperity 
and a higher average standard t)f living. 

Labor organizations or no labor organiza- 
tions, the working people of the various coun- 
tries of the world are prosperous or indigent 
in the ratio with which capitalism has been de- 
veloped there. Proportionate to their national 
wealth and population the people of England 
and France were not as prosperous as ours ; but 
that was due to the fact that England and 



18 Capitalism vs. Bolshevism 

France had invested a large proportion of their 
capital in foreign countries, while substantially 
all of the capital of the people of the United 
States had been invested at home, together with 
a very large amount of borrowed capital. 

Less than 25% of the world's people 
live under full-fledged systems of capitalism. 
Capitalism expresses itself in power-driven ma- 
chinery and highly efficient business organiza- 
tions. Its purpose is to reproduce capital with 
capital, and then to go on reproducing capital 
in multiple, accomplishing this by multiplying 
the productive power of human labor. 

In the earlier days of modern capitalism it 
was the habit of people to speak of "labor sav- 
ing machinery," and also of "labor displacing 
machinery. ,, With feelings of uneasiness they 
pointed out that machinery enabled one man to 
do the work of several men, thus reducing the 
demand for labor. Later on it was stated in 
another way, that machinery enabled one man 
to produce as much as several men, thus increas- 
ing very greatly the supply of desirable pro- 
ducts. Then machinery began to be looked up- 
on in a new light. 

Of course it was recognized then, as it 



The System 19 

should be now, that the end and aim of practi- 
cally all labor were production and distribu- 
tion. If more of these desirable results could 
be accomplished with less labor, so much the 
better. People never were as fond of work as 
of products. 

Modern machinery was only fairly well 
along toward general adoption before it devel- 
oped that its multiplication of the effectiveness 
of hand labor resulted in overproduction, which 
caused frequently recurring industrial depress- 
ions. This overproduction presented one of 
the most puzzling economic problems of all 
time. 

How capitalism solved the problem of over- 
production is told in another chapter. It was 
the crowning development of all economic his- 
tory. 

Although capitalism is one of the most re- 
markable, and doubtless the most vitally impor- 
tant, of man's creations, it is not the outgrowth 
of the acceptance of a carefully matured plan. 
No statesman, economist or philosopher of past 
generations left behind him a written line to in- 
dicate that he had any mental conception of an 



20 Capitalis7n vs. Bolshevism 

industrial future that tallied at all with the one 
that has developed. 

It seems that primitive man must have 
been following the dictates of his own practical 
experience and common-sense judgment when 
he broke over the boundary line from barbarism 
to civilization. Evidently he continued to fol- 
low them and they led him to capitalism. 

There are good reasons for the belief that 
man liyed on the earth for at least two hundred 
thousand years before he was able to take more 
than a very few steps forward industrially. Af- 
ter he had developed the ability to make crude 
stone implements, spears, bows and arrows, in- 
vented fish-nets and a few traps and snares to 
catch wild animals his progress appears to have 
stopped and left him stationary at that stage of 
his advancement for countless generations. 

If man had grown wings and thus been 
able to fly rapidly back and forth from the 
north to the south, as some of the migratory 
birds do, visiting each and every spot on the 
earth's surface in nature's harvest time, he 
might have continued a benighted barbarian to 
this day. It is quite apparent., however, that 



The System 21 

the Creator had a very different plan in view 
when man was fashioned. 

Man was made to be a worker. Unless he 
foolishly prejudices himself against it, work is 
one of the most pleasing occupations of his life. 
It is a game that is interesting every moment 
of the day. There are prizes for all of the play- 
ers, and for those contestants who apply them- 
selves most faithfully, never permitting their 
personal enthusiasm and ambition to relax, the 
prizes are very large. 

Our ancestors of primitive times who were 
obliged to work with so few mechanical helps 
and to endure such severe hardships and priva- 
tions, undoubtedly carried about with them a 
big fund of common-sense and were both re- 
sourceful and ambitious. Why they did not be- 
gin accumulating capital thousands of years 
earlier and using it to lighten their labors and 
to increase their productivity is not entirely 
clear. There is a great deal of evidence, how- 
ever, that stealing and a general disregard for 
property rights prevented accumulation, and 
that man's progress toward a higher civilization 
did not begin until after property rights had 



22 Capitalism vs. Bolshevism 

become a generally accepted and established 
moral and social principle. 

Early civilization was extremely strong for 
property rights. Until a few generations ago 
+he crime of theft was punishable by death. That 
custom probably did not bespeak a prevailing 
standard of cruelty so much as it did a popular 
determination to stamp out a tendency or habit 
which the people as a whole had come to con- 
sider as severe a crime against the public wel- 
fare as murder. It is evident, therefore, that 
the people of those generations that witnessed 
the emergence of mankind from barbarism to 
the borderland of civilization were convinced 
that the recognition of the individual's exclu- 
sive right to have, hold and use his savings and 
accumulations was to be the basis of human 
progress. 

In recent times the people have been taught 
to believe that the one quick and certain way to 
improve the condition of the wage earners is to, 
give them a larger share of the profits of cap- 
ital. If it can be demonstrated that this coun- 
try has been making too rapid progress indus- 
trially than it will have been proved that profits 
have been too large. More than 90% of all 



The System 23 

savings, interest and profits remaining af- 
ter taxes, have been reinvested in enterprise. 
Should we discontinue doing this and thus rob 
in advance the generations that are to come af- 
ter us? 

The most important of all products is the 
food crop ; but the annual crop of new capital, 
made up of interest, savings and profits, is a 
close second. This capital crop is a prime es- 
sential to the advance of civilization. It builds, 
extends and expands transportation systems, 
mills and factories, opens the mines and installs 
the machinery that enable man to produce and 
distribute, with constantly decreasing effort, an 
ever-increasing abundance and variety of the 
necessities and luxuries of life. It replaces fire 
losses and other unavoidable destruction, and 
makes it possible to scrap machines and even 
whole plants the moment something better has 
been developed to supplant them. To the ex- 
tent that profits are cut down the progress of 
the people toward a higher standard of living 
and civilization necessarily must be delayed. 

Capitalism in its hustle for profits carries 
the people up the hills of progress in palace 
cars, offers them every delicacy that appeals to 



24 Capitalism vs. Bolshevism 

the palate, takes every care of their comfort 
and health, and humors their every whim. The 
more it gives the less, in proportion, it takes 
for its services; and as it grows bigger and 
stronger and more all-pervading its power to 
domineer and to dictate steadily diminishes. 

Nothing else, not even education, exerts 
the influence that capitalism does to develop the 
initiative, the self-reliance and personal confi- 
dence of the individual. It is an individualistic 
system of industry. Millions of individuals are 
watching constantly for evidence that one or 
more of thousands of commodities and services 
are in demand, and hastening to supply them 
the moment it becomes possible to do so with 
profit. 

Not the human frailities of one, but the 
watchfulness and wisdom of millions are de- 
pended upon to see to it that all needs and 
legitimate desires are supplied. And what is 
the result? Except when the egotism and per- 
sonal ambitions of politicians clothed for the 
time with the power of government, interfere 
with and attempt to regulate this wonderful in- 
dividualistic system of production and distri- 
bution there always is enough of everything 



The System 25 

each day at all of the world's numberless centers 
of supply. 

Capitalism is a plant of tender growth. It 
thrives only where the rights of property are 
recognized and respected, w T here stability of 
government exists and conservative thought 
prevails. Thievery, either private or public, 
whether it be called banditry, piracy, socialism, 
bolshevism or by any other name, is a preven- 
tive of capitalism, capitalists being unwilling to 
take the chance of their property being de- 
stroyed by insurrections, stolen by bandits or 
confiscated by the government, in addition to 
the business risk which always is present. 

Contrast the condition of the working peo- 
ple in China, where capitalism never has devel- 
oped beyond the primary stage, with that, of the 
wage earners in America. The Chinese have 
very little machinery, few tools and hardly any- 
thing in the way of modern transportation fa- 
cilities. Although they work hard, 12 to 14 
hours daily, they are able to produce only a tri- 
fle more than the bare necessities of life. 

The Chinese cultivate the ground with 
pointed sticks, still weave about half of all the 
cloth used there on hand looms, saw boards 



26 Capitalism vs. Bolshevism 

from logs with elbow-grease and lug the water 
supply of considerable cities long distances in 
preference to piping it. The gross average pro- 
duction of the Chinese workingman is only a 
trifle more than the average American work- 
ing man wastes. It is so small that the 10 to 
25 cents a day they are paid when they work for 
wages constitutes no robbery. 

Yet the Chinese are noted for their indus- 
trious habits, and as hand workers they are 
highly efficient. The trouble is that they have 
neither domestic animals nor power machinery 
to help them increase their productive power. 
They are opposed to capitalism. Somebody has 
told them it would deprive them of employment 
and exploit them. 

Perhaps we shouldn't laugh at the silly ob- 
jection of the Chinese to machinery. As recent- 
ly as 50 years ago their white brothers in Eng- 
land and the United States were organizing 
strikes against the introduction of labor-saving 
machinery. 

Our socialists and single-taxers haven't 
anything on the Chinese either. The govern- 
ment of China confiscated the large land hold- 
ings and distributed them to the people 2,000 



The System 27 

years ago. It also loaned the farmers money 
at 2%. For once the Chinese rested. With 
plenty of land and money there was no occasion 
to work. As a result insufficient foodstuffs 
were raised to feed the people and they experi- 
enced a famine, hundreds of thousands dying of 
starvation. That particular famine was caused 
by social reform, not by nature — unless it was 
human nature. 

Now the Chinese are awakening. They 
have overthrown the old government and are 
discarding their old ideas. If their new gov- 
ernment takes an unqualifiedly firm stand on 
the right of the individual to own, acquire ac- 
cumulate and defend property, the industrial 
progress of China during the coming 50 years 
will be likely to astonish the world. 

What's the matter with Russia? Nothing, 
except that the people have been denied the 
benefits of capitalism. Before the great war 
82% of all the Russians were engaged in 
agricultural pursuits. They raised compara- 
tively little for export. Of course they were il- 
literate. The children had to help their parents 
cultivate the ground with pointed sticks. The 
whole country didn't earn enough to pay for 



28 Capitalism vs. Bolshevism 

education, or if it did, the people needed other 
things more than they did the ability to read, 
write and figure. 

No one will deny that the Russian people 
were "exploited" by the government; but it was 
a foolish exploitation. Capitalism would have 
increased the productive capacity of the Rus- 
sians seven-fold, given the people five times the 
amount they had been getting and returned ad- 
equate income to the government and big profits 
to capital. The capitalists of the world were 
afraid to establish industrial enterprises in 
Russia, because the revolution that now has 
come had been anticipated for many years. 

The pet indictment of capitalism in the 
United States is the slum. What is a slum? It 
is a place where Russians and the peoples of 
other misgoverned and backward countries con- 
gregate when they come here. The cheaply con- 
structed and crowded dwellings of the slums are 
more comfortable, cleaner and better ventilated 
than the sod huts from which such people emi- 
grated. To them the slum is promotion pro- 
gress. They save money, too, as is proved 
by the fact that 83% of all the deposits in the 



The System 29 

postal savings banks of New York City belong 
to people of foreign birth. 

When the people come to understand capi- 
talism they will array themselves in its defence. 
They will insist that the government stop inter- 
fering with the business of individuals and at- 
tend to its own. Strikes and everything else 
that tend to restrict the country's yearly vol- 
ume of production will be made criminal 
offences. Property rights will be respected and 
defended. 



Chapter II 

CAPITAL 

(Capital: That portion of the produce of in- 
dustry which may be directly employed to 
support human beings or to assist in pro- 
duction.) 

Generally speaking, all of that great va- 
riety of things which primitive man by no pos- 
sibility could have possessed, and which all 
civilized peoples have come # to feel that they 
must have, are capital. 

The cave dwellers had nothing but a few 
crude weapons and implements and their own 
physical powers. Their descendants of today 
have productive machinery and conveyances 
driven by steam, electric and gasolene power, 
which spare muscle, save time and multiply 
man's productive capacity. 

Capital is the savings of past generations, 
to which the savings of the present generation 
are being added. It is that portion of the sur- 



Capital 31 

plus product which has been saved and de- 
voted to the work of production and distribu- 
tion. Everybody has the privilege of spend- 
ing all of his income for self-gratification, for 
luxuries, comforts and entertainment, and for 
this reason those who save a portion of their 
income and use it to speed up industry, to raise 
the general standard of living and to strengthen 
the nation, are entitled to own it, and they also 
deserve great credit for having performed a 
valuable public service. 

Ships and railroad trains are capital. So 
long as they convey a man and his goods much 
more quickly, safely, satisfactorily and cheaply 
than he and his property possibly could be 
transferred by any other known method, he 
doesn't, or at least shouldn't, care who owns 
them. 

Textile mills and shoe factories are capital. 
If they supply a greater abundance of cloth 
and shoes, and enable us to purchase cloth and 
shoes at prices that represent smaller amounts 
of money than we can earn in the time it would 
take us to make them for ourselves, they cer- 
tainly benefit us to that extent. 

Foodstuffs, domestic animals, raw and 



32 Capitalism vs. Bolshevism 

partly manufactured materials for further 
manufacturing, growing timber — to the ex- 
tent that it will sell for more than the cost of 
cutting, transportation and sawing — devel- 
oped waterpowers, ores, coal, oil and other use- 
ful earth products are capital, and also im- 
proved agricultural lands, farm buildings, farm 
machinery, fences, seeds, fruit-trees and vines. 

Education and all the acquired knowledge 
of scientific and effective methods of producing, 
manufacturing and distributing the necessary 
and desirable things of life are capital, and it 
was the use of capital that made them possible. 

Natural intelligence, practical knowledge, 
resourcefulness, ability to handle and direct 
men and to make effective plans and execute 
them, a good character, the habits of truthful- 
ness, reliability, industry and thrift, a disposi- 
tion to be just and fair, to avoid bitterness, 
jealousy and envy toward your fellows; these 
attributes and accomplishments constitute per- 
sonal capital and they bring prosperity as well 
as happiness to their possessors. 

Unimproved land and undeveloped natural 
resources, monuments, the Egyptian pyramids 
and a great variety of things which have little 



Capital 33 

or no use value, including works of art, gems, 
jewelry, excessively costly residences and busi- 
ness structures, etc., more properly are denned 
as wealth. Factories and mines are fixed capi- 
tal and their products, ready for sale and use, 
are liquid capital. 

It is highly desirable that the existing sup- 
ply of capital be large and that it increase rapid- 
ly. Every individual should strive to acquire, 
save and accumulate capital. So far as the 
public welfare is concerned, however, it matters 
little whether the ownership of capital is con- 
centrated or widely diffused. 

All a billionaire gets out of his wealth is 
a living, such luxuries, pleasures and privileges 
as he may think it wise to indulge himself in, 
assurance that he will not be compelled to beg 
or starve and the satisfaction and pleasure that 
arise from the pride of ownership. He can't 
spend more than a small fraction of his income.' 
His wealth and at least 95% of its earnings, 
therefore, are devoted to the service of the 
public. 

If the profit on invested capital is large, 
then there is a greater amount of new capital 
to be invested each year. Big profits both in- 



34 Capitalism vs. Bolshevism 

vite competition and supply the capital to 
finance the competition. Immediately following 
a period of exceptional prosperity for invested 
capital there invariably is a period of indus- 
trial construction, development and expansion. 

The power of capital over the lives of the 
people decreases as the amount per capita em- 
ployed in industrial occupations increases. 
Where the capital supply is insufficient the 
owners of what there is can demand their own 
terms of the public. They are in as strong a 
position relatively as wage earners were dur- 
ing the last year or two of the great war, when 
a shortage of labor enabled labor to dictate 
working conditions, hours and wages. 

Wage earners and consumers somehow or 
other have been taught to believe that "vast ag- 
gregations of capital are being built up which 
eventually will become strong enough to defy 
the people and dictate both wages and the prices 
of all living necessities." It would be as sen- 
sible to say that eventually there will be such an 
immense amount of rain that all vegetation will 
dry up and die of drouth. 

Owners of capital must employ it to get 
profits, interest and dividends. As the, supply 



Capital 35 

of capital increases it competes for employ- 
ment and accepts lower and lower rates of in- 
come, just as an over-supply of labor leads to 
the acceptance of lower and lower wages by 
workingmen. 

If all the people of the United States could 
be made to understand the perfectly simple 
economic fact stated in the preceding para- 
graph they easily could make this country the 
paradise of the whole world before the end of 
another decade. 

By enacting laws that would make the 
owners of property feel secure in its possession 
and free from governmental attack and excess- 
ive taxation, by a protective tariff and an im- 
migration law that would keep both cheap labor 
and its products from coming in, the surplus 
investment capital of the whole world Would 
be attracted here. There soon would be a full, 
if not excessive, production of everything and 
wages not only would be high, but a day's pay 
eventually would buy nearly double the amount 
of the necessities and luxuries of life that it 
would anywhere else in the world. 

Such a condition would not result in over- 
production, followed by business stagnation 



36 Capitalism -vs. Bolshevism 

with unemployment of labor and declining 
wages. This old theory of economics, though 
absolutely sound 50 years ago, no longer holds. 
How capitalism has corrected the old-time evil 
of periodic overproduction is told in another 
chapter. 



Chapter III 
OVERPRODUCTION 

In the early days of capitalism the one 
foremost and universal desire of peoples was to 
be supplied fully and at all times with the 
necessities of life. Previously human existence 
had occupied for the most part the narrow span 
between shortage and famine. There had been 
few comforts and fewer luxuries. Therefore 
capitalism at first was engaged almost exclu- 
sively with the work of producing and distrib- 
uting necessities. 

Introduction of power machinery into in- 
dustrial operations and the use of steam rail- 
roads for transportation released great num- 
bers of men from the more arduous occupations 
such as lifting, lugging, pulling, hauling and 
carrying. A much larger supply of labor and 
an immense increase in its productive capacity 
came at about the same time, therefore. 

Naturally an overproduction of necessities 



38 Capitalism vs. Bolshevism 

soon resulted. Whenever more had been pro- 
duced than could be sold there was nothing else 
to do but discontinue producing. Cessation of 
operations, however, threw men out of employ- 
ment, cut off their wages and deprived them ot 
the ability to make purchases. 

Long periods of industrial depression fol- 
lowed, commonly spoken of half a century ago 
as "hard times. " They originated, almost in- 
variably in those earlier days, in overproduc- 
tion and were prolonged by "underconsump- 
tion. " Only two remedies for them were 
known — industrial expansion and war. Both 
of these reduced the ranks of those engaged in 
the production of necessities and, by providing 
employment and compensation for workers in 
another field, created a market for the surplus 
products. War not only used up materials, but 
killed off a portion of the labor supply and also 
consumed and destroyed capital. 

During "hard times" there was no en- 
couragement to expand industrially, overpro- 
duction itself being convincing evidence that 
more than sufficient productive capacity ex- 
isted already. Few if any capitalists ever 
favored war as a remedy for industrial depress- 



Overproduction 39 

ion. Nearly all wars have been brought about 
by need of or desire for more territory, or by 
ambitious sovereigns whom the people entrusted 
with too much power. Formerly wars made, 
but in these days of capitalism they unmake 
monarchs. 

Prosperity, overproduction and then a long 
period of depression; prosperity, overproduc- 
tion and then more "hard times." These oc- 
curred in what came to be called cycles. No- 
body was able to suggest a feasible remedy. 
They were responsible largely for the rise and 
development of such doctrines as socialism and 
a single tax on land values. Labor organized 
to combat the introduction of labor-saving ma- 
chinery and on that issue there were thousands 
of strikes. 

The individual initiative, which capitalism 
encourages, solved the problem without know- 
ing it was going to do it, and for a quarter of a 
century past there has not been a single period 
of industrial depression in the United States 
that was due directly to overproduction. 

Overproduction and then depression, or 
overproduction and then war followed by a long 
period of prosperity, had come to be consid- 



40 Capitalism vs. Bolshevism 

ered a sort of necessary process of economic 
law; but it was overthrown when capitalism 
finally evolved a substitute for war, something 
that withdrew an ever increasing army of men 
and women from the ranks of the necessity 
producers and compensated them liberally for 
serving in another field of activity. 

The substitute for war was play. Some 
30 or 40 years ago luxuries, entertainments, 
comforts and conveniences began to be multi- 
plied with astonishing rapidity. The bicycle, 
the trolley line and then the gasolene launch 
and the automobile ; professional baseball, mov- 
ing pictures, phonographs; running water in 
the home with bath-tubs, illuminating gas and 
electric lights — all these and too many other 
things to enumerate, not necessities, because 
our forefathers had managed to get along very 
nicely without them — soon became matters of 
almost universal enjoyment. 

A large and steadily growing number of 
men and women, a sort of joy army, was pro- 
ducing, distributing and dispensing luxuries, 
comforts and conveniences. All of its products 
soon were brought within the reach of the wage 
earners. The men and women in the joy army 



Overproduction 41 

no longer competed with the necessity pro- 
ducers, but they still were buyers and consum- 
ers of food, raiment and shelter. 

It was one of the wonderful triumphs of 
capitalism. Investment of capital and reinvest- 
ment of profits, interest and savings had raised 
the standard of living of a great people to a 
higher level than the most imaginative ever 
had dreamed possible. Power machinery had 
so greatly increased the productive capacity of 
industry that these additional blessings could 
be provided, and not alone the owners of the 
machinery, but the whole people were enjoy- 
ing the benefits. 

At last capitalism had reached a position 
of almost perfect balance. Continuous pros- 
perity had become a reality. It was no longer 
possible to bring forward a logical economic 
argument against industrial expansion or in 
favor of war. A large volume of production 
would not bring industrial stagnation, but 
would enable the people to enjoy more luxu- 
ries and pleasures. Overproduction had ceased 
to be a bugaboo. 

All of the panics and industrial depressions 
that occurred during the following 25 years 



42 Capitalism vs. Bolshevism 

were due to political interference with business, 
to ill-considered legislation and ill-advised ac- 
tivities of labor organizations. 



Chapter IV 
WAR LESSONS 

The great war has taught us that when the 
demand for anything exceeds the supply — 
when more is needed than is being produced — 
we either must pay high enough prices to en- 
courage an increase of production or fail to 
have our wants supplied. 

This is something the people of America 
had forgotten, because for more than a genera- 
tion before the war capitalism had provided 
constantly a relative abundance of all the de- 
sirable products. Therefore the people had be- 
come accustomed to believe that there could be 
no such thing as a shortage, except as a result 
of "deliberate connivance on the part of the 
trusts." 

The war also demonstrated forcefully that 
the law of demand and supply can exert a pow- 
erful influence on wages. There was a decrease 



44 Capitalism vs. Bolshevism 

in the supply of workmen and an enormous in- 
crease in the demand for them and wages ad- 
vanced in all parts of the country, the rise be- 
ing greater in some trades that were not or- 
ganized than in others that were. 

Again, the war demonstrated that the 
prices of everything and the cost of living al- 
ways must go up with wages. Even fixed 
prices, those fixed by custom as well as those 
fixed by government decree, had to be raised to 
keep step with advancing wages. 

Railroad and trolley fares, freight rates, 
gas, electricity, and even the daily newspaper 
advanced in price. Although the wages of 
newspaper employees rose comparatively little a 
portion of the increase in the pay of pulpwood 
cutters, of paper, ink and printers' roll makers, 
of coal, lead and antimony miners, and of the 
workers in a great variety of other industries, 
had to be paid by the newspapers, and their 
publication costs doubled. 

There is some difference of opinion as to 
whether advances in wages, shortage of sup- 
plies, governmental intermeddling with labor 
and business or the tremendous addition to 
the volume of paper money previously in cir- 



War Lessons 45 

culation was chiefly responsible for the aston- 
ishing increase in the cost of living. It is cer- 
tain that all four contributed their generous 
share. 

Ample evidence was supplied by the war 
that governments, powerful as they always 
think themselves to be, cannot pay their ex- 
penses with the product of a printing press 
without bringing about a disarrangement of 
prices and values that eventually will cost un- 
told billions in business and financial hesitancy, 
delayed industrial progress and unemployment 
of labor. 

The war must have convinced all the peo- 
ple that rich men and their sons are made of 
human clay, that they are every bit as patriotic 
and self-sacrificing as those having less capi- 
tal, that they always can be depended upon in 
time of emergency to give up their money and 
fight bravely for their country. Their devotion, 
their sacrifices, their support of the several war 
charities — also the more recently published 
lists of names of those to whom evidence points 
as having been beneficiaries of the secret Ger- 
man slush-fund — prove that many of the agi- 
tators and editors of the yellow press knew 



46 Capitalism vs. Bolshevism 

that they were not telling the truth when they 
said it was a capitalist war. 

The war must have made clear to every- 
body the value to the nation of the privately 
owned capital of its citizens and also of our 
much maligned "capitalistic industrialism." 
Unquestionably the privately owned mines, 
mills, factories, railroads and ships of France, 
England and the United States made possible 
the winning of the war, just as the lack of 
capitalistic development rendered Russia help- 
less the moment her accumulated stocks of am- 
munition were exhausted. 

With the relatively small amount of pow- 
er machinery at their disposal Russia's 180,- 
000,000 people were unable to feed and supply 
an army of 10,000,000 in the field even though 
fighting on their own soil. If the war had 
gone on three years longer the ability of the 
United States to place an army of 10,000,000 
in Europe and supply it there would have been 
demonstrated. 

How many soldiers and sailors this coun- 
try did feed and munition never will be known ; 
but it is certain that without the food, ammu- 
nition and other supplies which were produced 



War Lessons 47 

here and exported, Germany would have con- 
quered France and probably England too, long 
prior to the date on which the United States en- 
tered the war. 

Capital in use and the wonderfully effec- 
tive organizations created by capitalism en- 
abled the United" States to finance its own par- 
ticipation in the war and meanwhile extend 
billions of credit to its allies, to provide for 
its own people and army while it was supply- 
ing the deficiencies of the several other na- 
tions that were dependent upon it in part for 
materials with which to continue their fight 
against German autocracy. 

Lack of capitalistic development was re- 
sponsible for Russia's failure. German prop- 
aganda and intrigue did not weaken the gov- 
ernment or the military forces until after the 
defeat of the Russian army was practically 
complete. Russia didn't have the industrial or- 
ganizations and machinery to equip and muni- 
tion an army, the credit or the taxpaying abil- 
ity to finance a war. Statistics prove this con- 
clusively. 

Of Russia's vast population 82 1-2% 
were engaged in agricultural pursuits prior to 



48 Capitalism vs. Bolshevism 

the war. This indicates that the average Rus- 
sian farmer was able to produce only 25% more 
than enough to feed himself and family. By 
comparison, only 32% of the people of the 
United States were on farms, indicating that 
the average American farmer was able to raise 
enough to feed his own and two other families. 
The difference wasn't due to the' amount of 
work done or the fertility of the soil ; but to the 
fact that Americans are able to employ the 
most modern machinery and cultivate a very 
large acreage per man, while the Russian peas- 
ant is limited almost to a spade and a picked 
stick. 

Our own academic bolshevists reply to this 
with the statement that the Russians were "ex- 
ploited," that they were denied educational 
facilities in order that this exploitation might 
be continued unrestrained. The truth is that 
the Russians did not produce enough surplus 
capital to pay the cost of an educational sys- 
tem such as is supported by the taxpayers of 
America. Russia's middle-class constituted 
only 5% of her people. Let it be admitted that 
the Russian people were "robbed ;" but it must 



War Lessons 49 

be as plain as day that the robbers got hardly- 
enough to make the robbery worth while. 

What did the "robbers" of the Russian 
people do with their booty? Presumably they 
exported it and invested the money abroad. 
The gross value of Russia's exports for the 
year 1912 was $782,181,000, or a fraction less 
than $4.35 per capita. For the same year the 
value of United States exports was $2,362,696,- 
056, or $23.62 per capita. Russia's imports for 
the same year were valued at $603,463,000 and 
those of the United States at $1,812,978,000. 

Apparently what little capitalism there was 
in Russia was required to enable the people to 
keep alive. The surplus produced was barely 
enough for safety, far less than sufficient to pay 
for education and capitalistic industrial ad- 
vancement. 

The foregoing figures spell the doom of the 
bolshevik government of Russia. That country 
hasn't the productive capacity, with its people 
obliged to labor as they do almost with their 
bare hands, to provide itself with modern in- 
dustrial equipment. It must borrow capital, 
and under bolshevism this is impossible, be- 
cause the bolshevists have confiscated all the 



50 Capitalism vs. Bolshevism 

property of the rich and middle classes, and 
nobody will lend money to an avowed thief. 

The real proof of a nation's greatness is 
its ability to add constantly and substantially 
to its industrial strength, to provide its people 
employment and enable them to raise their 
standard of living from year to year. In Rus- 
sia the standard of living has been practically 
unchanged for 50 years. 

Perhaps the most important thing the war 
has demonstrated is the fact that absolute na- 
tional safety is dependent upon the ability of a 
nation to supply all the needs of its people and 
to munition its armies in time of war. No 
other great country in the world was in as 
good a position to do this as the United States, 
even Germany being a bad second. 



Chapter V 
A PROTECTIVE TARIFF 

Practically every organized nation in the 
tvorld collects tariff duties on a portion of its 
imports. All but a very few of them use the 
tariff as a means of giving encouragement to 
home industries, levying higher rates on goods 
that are or can be produced by their own peo- 
ple. 

The industries of the United States have 
been built up under protective tariff laws. It 
is partly as a result of this that wages are 
higher and living conditions better here than 
in any other country. The rapid accumula- 
tion of capital, the disposition of investors to 
reinvest their income at home, and the mag- 
nificent industrial development resulting, are 
to no small degree due to our national protec- 
tive tariff policy. 

The world war made it plain to every- 



52 Capitalism vs. Bolshevism \ 

body that ability to produce all of the prime 
necessities of life and of warfare is essential 
to national independence. Germany's won- 
derfully complete industrial organization, 
created under a scientifically administered sys- 
tem of protective tariffs, enabled her to sup- 
port her enormous population and carry on 
the war for four years during which period 
she obtained hardly any supplies from out- 
side. Free trade Britain found herself depen- 
dent upon other countries for food and a very 
long list of essentials from the outset, and only 
by keeping the lanes of shipping open was she 
able to continue in the war. 

The country which is equipped to supply 
the ordinary requirements of its people from 
the farms, mines, mills and factories within 
its own borders is independent. It is not ren- 
dered helpless when revolutions occur in, or 
wars break out between, foreign countries, and 
it is able to provide for its own population and 
defend itself whenever it becomes involved in 
an international controversy. At such times 
it is neither obliged to depend upon ships nor 
to draw heavily upon its own capital supply 
to establish new industries. Foreigners are 



A Protective Tariff 53 

not in a position to regulate the compensation 
or wages of its employers or employees. 

Almost all academic economists are free 
traders. The reason for this surprising phe- 
nomenon has been sought and found. They 
give no thought to the law of demand and sup- 
ply in its broader aspect when theorising upon 
the subject of international trade. 

Economists reason it out that as sugar 
can be produced more cheaply from cane in 
Cuba and other tropical islands than from 
beets in California, Colorado or Utah, the peo- 
ple of the United States should obtain their 
sugar from the lands where cane grows, get it 
more cheaply and benefit by the difference in 
price. Apparently it never has occurred to 
them that if the manufacture of beet sugar 
were to be discontinued there would be a con- 
stant world shortage and that the fluctuating 
output would cause prices to average at least 
50</f higher than they did during the 10 years 
preceding the war. 

In 1914, the last fiscal year before the war, 
43% of the world's sugar was made from beets. 
Germany, Russia, Austria-Hungary and the 
United States were the largest producers in the 



54 Capitalism vs. Bolshevism 

order named. In 20 years the production of 
beet sugar had increased 82% and of cane sugar 
250%. The protective tariffs of the beet sugar 
producing countries clearly had not discouraged 
the growers of cane; they simply had main- 
tained their beet sugar industries on a stable 
basis, and by doing so had made up what other- 
wise would have been a deficiency of supply and 
thus helped to keep the price of sugar low all 
over the world. 

The same rule will hold in a great variety 
of other commodities. There are lots of things 
that can be produced in limited quantity at less 
expense abroad than in this country; but we 
have had satisfactory evidence recently that 
there is hardly any standard commodity that 
can be produced in sufficient abundance to sup- 
ply world-wide needs, including our own, un- 
less the productive facilities of the United 
States are kept going with the rest. 

Even if it did add somewhat to the cost of 
living to build up home industries and produce 
the maximum of our necessities within the 
country, we ought to be glad to pay the price; 
but it is practically certain that our protective 
tariff has enabled us to buy almost everything, 



A Protective Tariff 55 

year in and year out, for less than we should 
have had to pay if we had depended large- 
ly upon foreign sources of supply. 

For many years we got our dyes from Ger- 
many at very low prices ; but the average was 
raised to a pretty high level by the almost 
prohibitive prices paid during the earlier war 
period. Incidentally the tariff was reduced in 
1913 on every one of the things in which a short- 
age developed in 1917. If protective tariffs had 
not assisted in building up its manufacturing 
enterprises and in developing its natural re- 
sources, America certainly would not have been 
able to play the important part it did in the 
recent war. Having the productive capacity 
and equipment, we helped feed and munition 
the allies from the outset. 

As a matter of fact we never heard much 
if any complaint about the high cost of liv- 
ing during the long period of years in which 
this country was committed definitely to a pro- 
tective tariff. That term was coined after the 
egregious blunder of the republicans, in fram- 
ing the Payne-Aldrich tariff law made demo- 
cratic success -a practical certainty. Anticipa- 
tion of a reduction in the tariff caused busi- 



56 Capitalism vs. Bolshevism 

ness men to hesitate, the country's volume of 
production increased less rapidly, supply grad- 
ually fell off while demand continued to grow, 
— and we called it the high cost of living. 

The consumer is interested in a large and 
continuous volume of output. He hopes there 
will be an oversupply. Nothing else exerts an 
equally strong influence to keep prices low. 
Therefore the consumer should not be willing 
to see anything done that will be likely to cut 
off a considerable portion of the world's pro- 
duction of any commodity of general use. 

All will agree that we should produce 
enough of everything that can be produced 
here with reasonable success to supply home 
requirements. In order to assure this, home 
production must be made sufficiently profitable 
to interest capital and business genius contin- 
uously. No other means of maintaining and ex- 
tending the domestic production of a long series 
of commodities has been discovered so far but 
a protective tariff. 

Any given business either does offer suf- 
ficient profit in this country to invite capital 
or it does not. Unless it is made sufficiently 
profitable to produce a great variety of things 



A Protective Tariff 57 

in the United States the facilities and the man- 
agemental organization for their production 
will not be supplied and built up to a high stand- 
ard of efficiency. Of course a few makeshift 
substitutes will be turned out at times when 
shortage of supply sends prices so high that it 
becomes profitable to make them by hand labor ; 
but that isn't business, it is simply a resort to 
primitive resources. 

American wages always have been higher 
than those paid in any otljer country. Prices 
of some things have been higher also; but no- 
where else in the world will the average wage 
paid buy as much as it will in the United States. 
No other working people are as well fed, clothed 
and housed or have the surplus cash with which 
to buy and enjoy as many comforts, pleasures 
and luxuries. 

As a result of the exceptionally high stand- 
ard of living that has been built up here, the 
United States has become the best market in 
which to sell in all the world. The fact that our 
exports almost always have exceeded our im- 
ports also has kept our exchange at a premium 
in foreign countries, which has served as a sort 
of premium to the foreigners who would sell us 



58 Capitalism vs. Bolshevism 

goods. It is a valuable privilege to the foreign 
manufacturer who pays much lower wages, em- 
ploys child labor and escapes many expenses 
that our manufacturers must pay, like liability 
insurance and factory inspection, to be able to 
send his surplus products into such a rich mar- 
ket, and those who advocate a protective tariff 
believe he should be obliged to pay for that priv- 
ilege. 

A system of tariffs that requires foreigners 
to pay our custom, house collectors at least 
the difference between their cost of produc- 
tion and ours gives the products of American 
capital and labor first call on the home mar- 
kets. Such a protective tariff does not pre- 
vent us from drawing on foreign sources of 
supply when for any reason we have a short- 
age or when our producers and merchants mark 
their prices too high, and experience has 
proved that it does not make it particularly 
difficult for us to sell our own surplus abroad. 

Protectionists do not believe that the nat- 
ural resources, the industries or the markets of 
this country should be developed for the benefit 
of foreigners. They believe that when we buy 
goods abroad the foreigner gets the equivalent 



A Protective Tariff 59 

in goods or the money, but that when we buy 
the goods at home we get both the goods and 
the money. 

Of course there are two kinds of protec- 
tionists, those who want a tariff so framed 
that they will be able to buy in an unprotected 
and sell in a protected market, and those who 
take the broader view that a protective tariff, 
by hastening and sustaining the upbuilding of 
the country and thus providing fuller and more 
continuous employment for labor at higher 
wages creates a domestic prosperity that .adds 
to the enjoyments, privileges and opportuni- 
ties of every individual in the country. 

There are three kinds of free traders, first, 
those whose economic vision is so shortened 
that they can see nothing in the question be^ 
yond their desire for the privilege of buying 
in the cheapest markets ; second, those who be- 
lieve that America's capital resources, inven- 
tive genius and high efficiency will enable our 
business interests, while paying higher wages, 
to compete successfully with the rest of the 
world, and third, those academic free traders 
who look upon the high standard of living and 
wages established in this country as artificial 



60 Capitalism vs. Bolshevism 

and who still cling to the obsolete theory that 
we should join in the struggle to capture the 
international trade of the world in order to find 
a market for our surplus products abroad. 

In the chapter on Overproduction it has 
been explained that a means had been developed 
in this country before the war to market sub- 
stantially all of our production at home. There 
were many products that we could and did ex- 
port, in more than sufficient quantity to pay for 
everything we needed or cared to buy abroad. 
Instead of being obliged to keep wages low in 
order to build up and maintain a large volume 
of foreign trade, and to lend our capital abroad 
to extend it, as England and Germany did, we 
were developing our own markets and paying 
high wages in order that our working people 
might be able to purchase the produce of our 
own industry, and the production and general 
enjoyment of luxuries were taking up the slack. 

Our industrial development was well bal- 
anced in its proportions,- also. As a result of 
past monkeying with the tariff we didn't pro- 
duce all of our wool, enough of our sugar 
or practically any of our dyes. We imported 
some of our metals, nickel and manganese be- 



A Protective Tariff 61 

ing the most notable ; but nickel can be produced 
so very much cheaper in Canada than from any 
considerable deposit of ore so far discovered 
in the United States that we hardly would be 
warranted in attempting to stimulate it by a 
tariff. All in all we were better equipped to 
stand having our imports shut off than any 
other great industrial country in the world. 

The protective tariff party had been over- 
thrown at the polls in 1912, however, and a low 
tariff law enacted in 1913. Business had begun 
going to the bad immediately, and by April or 
May, 1914, leading politicians of the low tariff 
party were vociferously calling upon state and 
national governments to appropriate money to 
irrigate arid wastes, clear cut-over timberlands 
and drain swamps, not because there was any 
shortage of cultivatable lands, but in order to 
provide work for the millions of idle men who 
were walking the streets in a vain search for 
the employment which they had voted away. 

Foreign producers were taking possession 
of our markets, as the protectionists always had 
claimed they would. Though the exports of 
the United States previously had been exceed- 
ing imports by approximately $50,000,000 per 



62 Capitalism vs. Bolshevism 

month, a complete change-about had occurred 
and we were importing more than we were ex- 
porting. 

Something had been overlooked. It was 
the fact that unless a new foundation has been 
supplied before the old one is torn away the 
strongest structure will topple. Protection 
could have been abandoned without any disturb- 
ance whatever provided it had been preceded 
by very heavy reductions in wages all along the 
line. Neither wages nor costs had been re- 
duced. Our producers were being undersold 
in our own markets. To operate at a loss meant 
bankruptcy. In some cases production was 
stopped and in others it was curtailed. Then the 
fact was brought home to us that labor doesn't 
draw down wages except when there is work for 
it to do. It came to be realized also that the 
ability of the working people to buy even cheap 
goods depends upon their having an oppor- 
tunity to earn the price. The merchandise we 
were importing didn't give employment to 
American labor. 

There had been another miscalculation al- 
so. The cost of living did not go down. First, 
enough foreign goods were sold here to stop 



A Protective Tariff 63 

or check domestic production. Second, it de- 
veloped that there was somewhat less than 
enough of these foreign goods to supply the 
American demand in full. Then prices ad- 
vanced and in some cases they reached higher 
levels than those we previously had been pay- 
ing for home products. 

By specious argument the American peo- 
ple had been deceived. They had been told that 
not the foreign producer but the domestic con- 
sumer really pays the tariff duties in higher 
prices for the goods he buys, that ability to pur* 
chase the necessities of life in the cheapest of 
the world's markets would be of great benefit 
to American labor and that as the protective 
tariff was favored by many capitalists it should 
be opposed by wage earners. 

Another argument of the low tariff party 
was that American producers sold their prod- 
ucts abroad at lower prices than they charged 
for them at home. This claim was not without 
some foundation, and it never will be. The sur- 
plus product, that is ,the quantity of any special 
make of goods that may have been turned out in 
excess of the amount that the markets regularly 
served will absorb, always must be sold for what 



64 Capitalism vs. Bolshevism 

it will bring, usually for less than cost, and it 
invariably is disposed of as far away as possi- 
ble in order that it may not disturb the home 
market. 

The manufacturer likes to run his plant at 
full capacity, because full capacity operations 
make for lower costs; and he endeavors by 
every means at his command to sell his entire 
product profitably, but is not always success- 
ful. Being human he sometimes makes mis- 
takes of judgment. In any given year his goods 
may not come quite up to the required standard 
of popularity because he has erred in selecting 
a weave for his woolens, a print for his calicos, 
a style for his shoes, a container or wrapper for 
his package goods or effective methods of ad- 
vertising and selling. He ends the year with a 
surplus on his hands. What should he do with 
it? 

He doesn't shut down his factory, throw his 
help into idleness and wait for the market to 
absorb his surplus, and he doesn't take the 
chance of damaging the reputation of his pro- 
duct forever by offering such an accumulation 
to his regular customers at cut prices. He 
sends it abroad, sells it for what it will 



I A Protective Tariff 65 

bring, pockets his loss and tries to use better 
judgment the following year. He has tried to 
hide his mistake. 

Americans traveling in foreign countries* 
however, run across such lots of goods, make 
purchases and tell the story when they get 
home. We ask no questions, but proceed to 
make a political issue out of this astonishing 
discovery. English and French manufacturers 
also sell their mistakes abroad, frequently in 
this country. They also are discovered; but 
their explanation never is doubted. It is, "In 
order to introduce them into the American 
market, we sold a large consignment for much 
less than cost." One hardly would expect the 
truth to be told about such transactions. To 
give publicity to your own blunders is not a 
human trait. 

There is another reason why American 
merchandise sometimes is sold cheaper abroad 
than at home. It is the lower cost of retail- 
ing. Our purchasers demand a maximum of 
service from the retailer, get it and naturally 
pay for what they get. In most foreign coun- 
tries customers pay cash over the counter and 
carry the goods home. Americans won't pa- 



66 Capitalism vs. Bolshevism 

tronize stores conducted that way. They insist 
upon American standards of retail service and 
pay for them in higher prices. 

Now about this statement that not the 
foreign producer but the domestic consumer 
really pays the duties. Let it be understood 
at the outset that there isn't any such thing as 
free trade. Great Britain is not a free trade 
country. To give support to its propaganda 
by which it has been endeavoring for genera- 
tions to break down the protective tariff walls 
of other countries, however, the government 
takes great care not to lay any duty that possi- 
bly can be construed as protective. Its "tariff 
for revenue" is collected on goods that are not 
or cannot be produced at home. 

Let us see what was happening while the 
voters in the United States were being taught to 
believe that the British system was much easier 
on the people than the American protective 
tariff policy. 

During the last full year of a protective 
tariff, the one which ended June 30, 1913, the 
duties on imports collected at all the custom 
houses of the United States and Alaska 
amounted to $318,142,344. As the population 



A Protective Tariff 67 

of the United States and Alaska then was 97,- 
028,497, the customs collections per capital 
were $3.22. 

During the last full year preceding the war, 
the 12 months of 1913, duties on imports col- 
lected at all the custom houses of the United 
Kingdom, namely, Great Britain and Ireland, 
were £32,045,194, equal in our money to $155,- 
931,914. As the population of Great Britain 
and Ireland at that time was 45,221,219, the 
customs collections per capita were $3.23. 

There certainly is a strong basis for the 
argument that the $3.22 per capita collected on 
imports to the United States was not paid, at 
least not wholly, by American consumers; buf 
there is no possible basis for the claim that the 
$3.23 per capita collected by the United King- 
dom was not paid by British and Irish con- 
sumers. To whatever extent our protective 
tariff was building up our enterprises, stimu- 
lating domestic business and keeping Ameri- 
can labor employed at high wages it was bet- 
ter than the British system. Is it possible to 
think of any way in which the British system 
was better than ours? 

Presumably somebody will declare that 



68 Capitalism vs. Bolshevism 

the British system of tariffs helped England 
to build up her foreign trade. If so, the United 
States should fight shy of it. As we Americans 
are being induced to believe that we should emu- 
late England and Germany, and give more 
attention to the development of foreign mar- 
kets than to the nursing of our own it may 
be well to point out what British free trade 
and foreign trade have done for Ireland. 

Ireland is an agricultural country. In or- 
der to stimulate its own foreign trade England 
for generations had been loaning its capital to 
backward countries all over the world. Of 
course it was necessary to buy as much as was 
sold, it being impossible for its foreign cus- 
tomers to pay in gold. As England's foreign 
investments grew she had to increase her for- 
eign purchases, taking goods for interest in ad- 
dition to goods for goods sold. She traded 
largely with backward, agricultural countries, 
and she brought home foodstuffs produced by 
the cheap labor of Asia and sold them in direct 
competition with the products of the Irish farm- 
er. 

Thus the Irish agriculturist was obliged to 
sell his crops in a market the price level of 



r A Protective Tariff 69 

which was regulated largely by the products 
of a 15-cents-a-day Asiatic labor ; but he bought 
his clothing and shoes, farm implements and 
fuel at prices regulated by $2 and $3 labor. It 
is easy to understand why he left home and 
came to the United States; but it is difficult to 
comprehend why he has voted for free trade 
ever since he got here. 

If Americans go crazy after foreign trade 
it will have the same effect on our farmers that 
it did on those of Ireland. After a few years 
we shall be obliged to depend largely upon for- 
eigners for our food supplies. We must not al- 
low ourselves to forget, however, that during 
the past 50 years our own home market has been 
worth more to American manufacturers than 
the entire external trade of Asia, Australia and 
Africa would have been even if they could have 
obtained it. A protectionist is one who believes 
in developing trade at home. 



Chapter VI 

WAGES 

(Wages : Pay given for labor, usually manual 
or mechanical at short stated intervals, as 

distinguished from salaries or fees.) 

It is possible for wages to be too low and 
also too high, for the working day to be too 
long and also too short. 

The low wages paid in Japan and China, 
where living is very cheap, have been respon- 
sible in part for the relatively slow industrial 
progress of those countries. Their wages could 
not advance otherwise than very slowly, how- 
ever, because of China's scarcity of capital. 
Where production and distribution are con- 
ducted by manual labor, without the aid of pow- 
er machinery, labor's daily product isn't worth 
more than 50 or 60 cents. 

In recent years, particularly during the 
period of the great war, Japan has been gaining 
very rapidly in her capital supply and Japanese 



r Wages 71 

wages have advanced appreciably. Exceedingly- 
low cost of production, made possible by the 
abundant supply of cheap and efficient labor, 
however, will enable Japanese and Chinese 
manufacturers to find a profitable market for 
their products in other countries, and for some 
years to come it will not be necessary for them 
to raise the home standard of living and create 
a domestic market. 

When wages are too high, foreign products 
come in and supply enough of the demand to 
throw labor out of employment. In this way 
alone high wages hurt the employer by prevent- 
ing him from doing business. It is only when 
factories are running continuously and at ap- 
proximately full capacity that the owners real- 
ize good profits. 

The moment a factory is closed down all 
business risks cease, however, and for this rea- 
son no owner will consent to pay such high 
wages and sell his products so low that his 
profits disappear altogether. Wages, whether 
high or low, must be included in the cost of the 
product or the service. 

If the working day is too long the worker 
is deprived of "pep," and also of sufficient time 



72 Capitalism vs. Bolshevism 

to play and spend his money. Fewer hours 
tend to elevate him and make him strive for a 
higher standard of living. This benefits the 
worker, the capitalist and the country. 

Too short a working day, however, would 
fail to yield the big volume of production that 
is essential to a high standard of living for all 
the people. It might be possible in the United 
States to produce and distribute the bare neces- 
sities of life with a five-hour working day ; but 
what would the workers do the remaining 19 
hours with all the luxuries, entertainments and 
comforts abolished? 

It is a fair estimate that five-ninths of the 
workers of the United States, in other than war 
times, supply the whole population with the act- 
ual necessities of life, while the rest produce and 
dispense all the other things, including tobacco, 
beer and chewing gum; trolleys, automobiles 
and bicycles ; theatres, movies, baseball and cir- 
cuses; millinery, "glad clothes," face powder 
and the many other diversions and embellish- 
ments of life. 

Only a primary knowledge of mathematics 
is needed to figure that if five hours' work is re- 
quired to supply the necessities, then a seven- 



Wages 73 

hour day would provide the people with only 
half as much in the way of desirable non-essen- 
tials — comforts, entertainments and luxuries, 
as a nine-hour day does. 

The wage earner doesn't want a shorter 
day to get more rest, but in order that he may 
have more time for recreation and personal en- 
joyment. Capitalism can't give him both be- 
cause it isn't yet within its power, to do so. 
Necessities and the facilities for enjoyment 
must be produced and distributed, and the 
nine-hour day enables labor to get a great deal 
more of the things that make his life happy 
than seven or eight hours possibly could pro- 
vide. 

It is for the best interest of the wage earn- 
er that he do a good big day's work, aim to 
turn out a first-class product with as little 
waste as possible and help his employer make 
money. This is a flat contradiction of the la- 
bor agitator's teachings ; but let us talk it over. 

Such effort on the part of all the workers 
would result in a larger volume of output pro- 
duced at a lower cost and sold at lower prices, 
hence decreased living expenses for the wage 
earners. Employers either would advance 



74 Capitalism vs. Bolshevism 

wages or use their larger profits to expand their 
industries and to establish new enterprises, 
thus increasing the demand for labor. 

Organized labor advocates collective bar- 
gaining. One of their illustrations is : "If there 
are more ditch-diggers than there are ditches 
to dig wages will decline ; but the ditch-diggers 
by combining can establish and maintain a liv- 
ing level of wages." 

Now take a look at the matter from the 
other standpoint. If the ditch-diggers do a good 
day's work and help make the digging of ditches 
a profitable enterprise for capitalists there soon 
will be more ditches to be dug than there are 
ditch-diggers. Then instead of a few ditch-dig- 
gers being obliged to remain idle all the time in 
order to keep the rest employed at satisfactory 
wages, all will have work and the excess demand 
for ditch-diggers will advance wages to a much 
higher level. 

Everybody engaged in any given line of in- 
dustry, whether owner, manager or employee, 
should realize that he is interested in keeping 
the cost of the product low. If it can be sold 
at a price that will enable it to compete success- 
fully with its substitutes, the demand for it will 



Wages 75 

be constant and the enterprise never will have 
to shut down* for the want of a market for its 
products. It is more tiresome to work slowly 
than rapidly, and certainly no honest man de- 
sires to be paid high wages when his conscience 
tells him he is not earning them. 

Obsessed by the old and exploded theory 
that rapid work will bring overproduction and 
overproduction idleness, some of the labor lead- 
ers advise the members of their organization to 
work slowly, to put a low maximum limit on 
their daily output. Such limitations have been 
established in many trades, and the "full-train- 
crew" laws of several states are recognitions 
of the principle by legislatures. 

This idea certainly must have originated 
in the infernal regions, because it is the most 
diabolical of all the evil ones that have been 
taught by the opponents of modern progress, 
prosperity and popular well-being. Every 
workingman who accepts this teaching be- 
comes a party to a conspiracy to deprive him- 
self and family of comforts, conveniences and 
luxuries that they otherwise could and would 
enjoy. 

As has been pointed out in the chapter on 



76 Capitalism vs. Bolshevism 

Overproduction, the surplus output provides us 
with all of our comforts, conveniences and lux- 
uries and also pays the cost of industrial ex- 
pansion. It builds the new mills, factories, 
railroads and other equipment that still further 
increase the productive capacity of the na- 
tion. Therefore, those who restrict or retard 
production by limitation of effort or by strikes 
stultify themselves and deprive the public of 
its due. 

"Loaf on the job; work slow," are injunc- 
tions which in time might dull and destroy an 
hereditary trait which has exerted a stronger 
influence than anything else to enable the white 
race to dominate the world. Two illustrations 
follow. 

If you hire the laziest man you know to cut 
wood for you at $10 a day and supply him with 
a dull ax, he will protest. It is no harder work 
to swing a dull ax, and the duller it is the longer 
his good job will last; but heredity has created 
in him a desire to achieve, to make his blows 
tell. Every one of his ancestors was forced by 
necessity to work for results. It is their in- 
fluence that sends him to his employer with an 
ax to grind. 



Wages 77 

In the early days of the horse-car line a 
company was permitted to lay its tracks 
through a narrow street. It hired men to 
shovel the first heavy snow of winter off its 
rails. There was no other place to throw the 
snow but on the sidewalks. This detail had not 
been covered in the contract of the railway com- 
pany with the city. Owners of property were 
required to keep the sidewalks in front of their 
buildings free of snow. They hired men to 
shovel the snow off the sidewalks and back it 
went on the railway tracks only to be thrown 
again on the sidewalks. In both cases the men 
were employed by the day or hour. Yet they 
fought. Even the police couldn't prevent them 
from fighting. Hereditary instinct prompted 
the blows. 

This desire to achieve, to get results, is one 
of the best things we have got. Every attempt 
to impair it should be punished as a crime. 
Men often are headstrong enough to go on 
strike ; but whenever they do they carry in their 
hearts a feeling that they are doing wrong, in 
their minds an admonition that they remain on 
the job and continue to pile up results. 

Every strike reduces the nation's sum total 



78 Capitalism vs. Bolshevism 

of production. Thus it both diminishes the 
amount of money there is to spend and de- 
creases its purchasing power. It helps to throw 
farther away into the future the millenium that 
capitalism is creating for labor, when, in time 
of peace, there will be so much prosperity that 
there will be more good jobs open than there 
will be workingmen to fill them. 

The point for the wage earner to keep in 
mind is that such things as governmental in- 
terference with business, bolshevik and social- 
istic agitation, persistent nagging of employers 
by the unions, the various idealistic brands of 
reform legislation, restriction of output, reduc- 
tions of working hours and strikes all exert an 
influence to increase the proportion of his year's 
earnings that he must pay out for mere living 
expenses. The capitalist system is just as 
simple, after you understand it, as sawing wood, 
and if all the things enumerated above were put 
between you and the wood-pile you know it 
would take a much longer time to fill the box 
back of the kitchen range. 

Capital is the only thing that ever did or 
ever can improve the condition of labor. And 
capital must be produced ; it can neither be leg- 



Wages 79 

islated nor orated into existence. It follows, 
therefore, that the faster and more steadily the 
wage earner works the more rapid pace he is 
making toward that condition he so much de- 
sires, increasing compensation and decreasing 
cost of living. 

Why don't the labor organizations get wise 
and demand a revival, so far as is possible, of 
the old piece-work system? They were not so 
much to blame for its practical abolition as the 
employers were. What the unions said about 
the employers cutting down the price per piece 
as fast as the workers increased their speed of 
production in many cases was more than half 
true. 

Until recent years employers haven't 
known that it is good economy for them to pay 
a higher wage per unit for a 25 or 50% larger 
volume of output per man. It effects a big sav- 
ing in overhead expenses. Less factory space, 
upkeep, superintendence, light, heat, etc., have 
to be paid for per unit of product. Why not 
compute this saving, offer 75% of it to the men 
as a consideration of their going on a piece-work 
schedule and then arrange that one-third of 
their share shall be divided each month among 



80 Capitalism vs. Bolshevism 

the third of the men who have turned out the 
largest amount of work, as a bonus? 

Introduce the elements of a game or of an 
athletic contest into the day's work. ' When im- 
provements of system and better machinery are 
brought into play that will enable the men to 
produce still more rapidly, thus necessitating 
a reduction in the wage rate per piece, arrange 
the new rate on a 50-50 basis* giving the work- 
ers half the benefit accruing. After labor once 
comes to understand that it is just as much in- 
terested in a big volume of production as the 
employer is it should be possible to make piece- 
work and compensation arrangements that will 
obliterate all thoughts of strikes. 

The basis 01* trade unionism, what has come 
to be called collective bargaining, makes a 
strong appeal and great numbers of men who 
ought to know better are now giving the prin- 
ciple involved their indorsement. It ought to 
be clear that it doesn't add a nickel a year to 
the production of the country or increase in any 
way tne value of the product. Instead, it is 
promotive of strikes which decrease the gross 
volume of output and advance the cost of living. 

Through their organizations cigarmakers, 



Wages 81 

shoemakers, the men employed in the several 
branches of the building trade and various other 
groups, have been able to obtain for themselves 
materially higher wages than the vastly larger 
number of workers in all other occupations. 
As a result at least 90% of the wage earners of 
the country are obliged to pay tribute to these 
little labor trusts every time they buy a cigar 
or a pair of shoes, or rent a house or a flat. 

The whole idea is wrong. If all labor was 
organized it simply would be a case of one 
trade trying to get ahead of the others. Strikes 
would be so frequent that they would reduce 
the volume of production disastrously and no 
matter how high wages might be raised the cost 
of living would rise much faster. 

If striking were made a criminal offence, 
the individual would get a job and hold it on 
merit. The volume of production would be very 
much larger and the cost of living would drop to 
the lowest possible level. Elimination of the fear 
of labor troubles would attract capital to indus- 
try, resulting in a demand for labor that would 
cause wages to advance generally and in a man- 
ner that would be far more just to all concerned. 
Strikes don't take something from the capitalist 



82 Capitalism vs. Bolshevism 

for the benefit of the wage earner; they inter- 
rupt and delay the activities of both to the detri- 
ment of all consumers. 

An illustration of what comes from inter- 
ference with the natural law that adjusts wages 
is furnished by the railroad labor situation at 
the present time. Director General McAdoo 
arbitrarily increased the wages of railroad em- 
ployees by approximately $910,000,000 a year 
early in 1918. This advance followed several 
others and more recently has been added to, and 
at the present time railroad workers are re- 
ceiving 117% higher wages than they were 
eight years ago. 

In order to make it possible for the railroads 
to pay his immense increase in wages, freight 
rates were advanced 25 to 40% and passenger 
fares about 50%. Thus the burden was trans- 
ferred directly to the shoulders of all the other 
workers of the country. 

Increased cost of transportation added an 
average of $11 per capita or $55 a year per fam- 
ily to the general cost of living. There being 
about 40,000,000 workers in the country, it was 
a case of adding $29 a year to the expenses of 
37,900,000 workers in order to advance the 



Wages 83 

wages of about 2,100,000 railroad employees an 
average of $600 a year per individual. In this 
case the many unquestionably have been made 
to suffer for the benefit of the few, because the 
immense increase in wages hasn't added a dollar 
to the country's production or in, any way im- 
proved the transportation service. 

All other wages could be advanced in propor- 
tion, provided the prices of everything first 
were increased as freight rates and passenger 
fares were ; but after that was done the railroad 
employees would be no better off than they were 
before Mr. McAdoo decided to be generous to 
them with other people's money. They no lon- 
ger would be able to buy cheap products, kept 
cheap by the relatively lower average wage paid 
to producers. Everything purchasable with 
money would be as high in proportion as rail- 
road fares and freight rates. 

But what would happen? Why, the prod- 
ucts of other countries, of course, would come 
in and taKe the place of home products, and 
within a comparatively short time nearly all of 
the working people in the United States would 
be out of employment. By foolishly inflating 
the prices of everything in order to raise wages 



84 Capitalism vs. Bolshevism 

we should have made this the highest market 
in the world, and the products of all foreign 
countries would come here as fast as the ships 
could bring them. 

When advances in wages take something 
from one group of workers for the benefit of 
another group it is both injustice and bad prac- 
tice. When they cut down the earnings of capi- 
tal they slow up the country's industrial prog- 
ress and reduce the demand for labor. When 
all discussions of wages, profits and reforms are 
abandoned capital is invested, business activity 
increases, the cost of living declines, labor is 
fully employed and wages tend to advance. 



Chapter VII 
BOLSHEVISM 

Bolshevism is the name that has been given 
to the first partially successful attempt to es- 
tablish socialism or communism as a form of 
government in a great country. One socialist 
will tell you with positiveness that bolshevism 
is not socialism, and another, with equal assur- 
ance, that it is. In the future it will be defined 
as the chaos, the confusion, the sweeping away 
of means of getting a living, that eventuate 
when socialists are permitted to have their way. 

Socialism has been tried and tested under 
almost every conceivable condition and never 
has been a real success. Communities large 
and small, religious and non-religious, monog- 
amous and promiscuous, with abundant finan- 
cial backing and with none, have tried every 
known brand of socialism, and the socialist ad- 
vocate of today points to no one of them with 
pride. 



86 Capitalism vs. Bolshevism 

The incursions of the government into 
business, post offices, water supplies, sewers, 
schools, and here and there ownership of rail- 
roads, electric and gas lighting plants and 
street railways, may be spoken of properly as 
state socialism. The public school system is a 
success, first, because so many parents watch it 
constantly and, second, because it sells nothing 
and collects no money. It is not so much of a 
success as yet, however, that it has driven pri- 
vate schools out of business. 

There are a few people who claim, and per- 
haps believe, that government ownership of 
railroads has been a success in one country or 
another ; but all of the people who have investi- 
gated know better. Government owned rail- 
roads in Europe before the war were less sub- 
stantially equipped, gave poorer service, 
charged very much higher rates, paid incom- 
parably lower wages and were capitalized for 
50 to 100% more per mile than the privately 
owned railroads of the United States. None of 
them paid taxes and only one or two earned the 
interest on the amount the governments had in- 
vested in them. If they were a success it was 
in some other respect than those noted. 



Bolshevism 87 

Like the quack doctor, however, the social- 
ists come back with the argument that the 
many failures of their remedy were not due to 
any lack of potency, but to the incorrect 
methods with which it has been applied. They 
claim that their schemes cannot succeed on a 
small scale, because of the necessity of com- 
peting with and patronizing capitalistic inter- 
ests ; but that when adopted universally it will 
create a heaven on earth and "give to the 
worker the full product of his labor." 

If there were no other objection to social- 
ism, its proposition that we virtually burn our 
bridges behind us, by surrendering our prop- 
erty and abandoning all chance of personally 
accumulating any more, and enter a new system 
from which there would be no retreat or escape 
except through revolution or starvation and 
death, would be sufficient to repel all men of 
normal reasoning powers. 

Socialism stands for government owner- 
ship and operation of all means of production I 
and distribution. The plan is, of course, for ^ 
the government to confiscate the accumulations 
of the resourceful and the savings of the thrifty 
and thereafter divide all the products of indus- 



88 Capitalism vs. Bolshevism 

try 50-50 among the geniuses and the num- 
skulls, the energetic and the idolent, the indus- 
trious and the lazy. 

There are so many more varieties of social- 
ists than there are of pickles, however, that no 
direct or specific statement of their policies or 
plans is permitted to go unchallenged. They 
get together on such generalizations as brother- 
hood of man, co-operative commonwealth, in- 
dustrial democracy, abolition of wage slavery, 
labor produces all wealth and is entitled to the 
wealth it produces, etc. Every socialist has 
his own plan to bring all these things about; 
but the history of the movement fails to record 
that as many as three socialists ever were 
known to be in complete agreement at one time. 

In a general way they seem to agree that 
the accumulations of the thrifty should be 
stolen by the government for the benefit of the 
indigent. They would make the government a 
Robin Hood, to rob the rich and give to the 
poor. Nearly all of the leading socialists are 
atheists, bitter enemies of the church and all it 
stands for. Many of them advocate making 
woman the property of the state, which from 
their standpoint means common property, and 



Bolshevism 89 

evidence has been presented to congress recently 
that the Russian bolshevists already are putting 
this theory into practice. 

Under socialism the people would have to 
depend upon one central executive and manage- 
mental organization. If this proved incom- 
petent and wasteful, as managements frequent- 
ly do in all human affairs, the public would be 
compelled to endure a period of extreme suffer- 
ing and privation while it was being reorgan- 
ized, new plans perfected and put in operation. 

In the industrial world it already is recog- 
nized that an enterprise may be too big to be 
managed and directed by a single human mind 
supported by a board of directors. There is 
nothing now in existence, however, that can be 
compared with the stupendous undertaking sug- 
gested of government ownership and direction 
of all the industries of a country like the United 
States. The recent aircraft fiasco, the ship- 
building mess and control of the railroads 
should have dispelled all previously existing 
theories as to the government's ability to con- 
duct industrial undertakings. 

If we had socialism and only one corpora- 
tion of national scope, how would it be possible 



90 Capitalism vs. Bolshevism 

to develop men to take charge when death or 
disability made a change necessary? Would 
the young man who had distinguished himself 
by correct judgment, resourcefulness and ex- 
ecutive ability be well enough known to the pub- 
lic to command votes? Is it not possible that the 
man who by gift of oratory and eloquence was 
able best to recommend himself would secure 
the position regardless of his industrial ability? 

The most vitally important matter that a 
socialist government would have to handle 
would be that of capital accumulation. A 
j people must retrogress, stand still or progress. 
If labor received the full product of industry, 
and consumed it, retrogression naturally would 
ensue. Something more than upkeep would be 
required to enable a people to stand still in- 
dustrially. 

As all progress unquestionably depends 
upon a continuing and constantly increasing 
supply of surplus capital invested wisely in in- 
dustrial equipment, it necessarily follows that 
the labor of each generation would be obliged 
to get along some way with considerably less 
than the total current product of industry in 
order that better equipment and a greater 



Bolshevism 91 

amount of it be provided for the larger genera- 
tion to follow. 

Here in the United States under capitalism 
we are alleged to have $250,000,000,000 of 
wealth and about 40,000,000 of our people are 
said to be engaged in gainful occupations. This 
is $6,250 per worker. Eliminate $90,000,000,- 
000 for land, forests and other wealth, and it 
appears that about $4,000 of invested capital 
exists for each worker. A considerable pro- 
portion of this has to be replaced two or three 
times during the lifetime of each generation, 
and almost all of it once. Therefore, in a 
country that is making rapid progress indus- 
trially, it apparently is necessary that at least 
$5,000 of surplus capital be produced and 
added to the common stock during the lifetime 
of the average worker. 

Therefore, if the workers get an average 
of $833 annually for 30 years, or $25,000 for 
the work of a lifetime, under capitalism, they 
receive five-sixths of the produce of industry 
and captalists take the remaining sixth and 
reinvest it in enterprise. It probably would be 
nearer correct to say that the workers get ten- 
thirteenths, two-thirteenths go back into indus- 



92 Capitalism vs. Bolshevism 

try and one-thirteenth pays for the luxuries and 
vanities of the capitalistic classes. 

Socialist writers invariably have founded 
their arguments upon the false premise that 
as wealth accumulates poverty increases. They 
claim that capitalism is resolving the people into 
millionaires and paupers, into employers and 
wage slaves. 

The exact opposite of such assertions is the 
truth. Nothing else diminishes poverty as 
capitalism does. The contrast it creates makes 
poverty more noticeable. Capitalism also 
makes extreme poverty such an exception that 
a case of it attracts much attention. 

All of the earliest socialist writers declared 
that capitalism would eliminate the middle 
class, lead to the accumulation of all wealth in 
a few hands and eventually enslave the hand 
workers. From that time on to the present 
each succeeding generation has witnessed the 
middle class growing steadily more numerous 
and the hand workers more prosperous and in- 
dependent. There are far larger numbers of 
men in the professions, of merchants, salaried 
men and home owners in the United States pro- 
portionate to the total population now than 



Bolshevism 93 

ever before in the history of this or any other 
country, and it is here that we have the maxi- 
mum of capitalism. 

Socialists rarely quote statistics, and when 
they do they invariably quote them incorrectly. 
Men who are able to compute accurately from 
statistical data, and who are not so mentally 
lazy that they will not do so, are never found in 
the ranks of the socialists. A great many 
people have been converted from socialism by 
their own computations. 

Any socialist who is willing to disillusion 
himself can do so by making a thorough and 
painstaking search for the immense amount oi 
wealth that he and his brother socialist are in 
a habit of declaring the capitalists have taken 
away from labor. If he carries his search far 
enough, he will find that not more than 2% of 
this country's capital accumulations prior to 
the war had been invested abroad, that more 
than 90% of all interest, dividends and business 
profits were reinvested every year in machin- 
ery, equipment and facilities designed to in- 
crease and expedite production and distribu- 
tion, that of all the benefit accruing from such 
investments the workers received at least 



94 Capitalism vs. Bolshevism 

three-fourths, and also that the wage earner not 
only gets the full product of his labor, but a 
very large share of the vastly greater amount 
that invention, managemental genius and capi- 
tal have added to the productivity of industry. 

It would be impossible to demonstrate by 
figures or to prove by argument and evidence 
that the working people would be anywhere 
nearly as well off as they are now if the govern- 
ment did own all of the wealth and capital of 
the country. Not a single case can be pointed to 
in the world or its history where business or 
anything else is or was managed as efficiently 
by government as by private owners. 

Excepting the few thieves who get away, 
all of the people who use capital, whether pri- 
vately or publicly owned, must pay for the use 
of it. The facilities of production and distri- 
bution which capitalists own are used by the 
public just as they would be if owned by the 
government, and the expense of using privately 
owned capital is much less. 

Some of the popular writers on socialism 
have pictured an ideal state in which every 
known device for eliminating manual labor 
would be employed. The cities would be so 



Bolshevism 95 

laid out that all service would be rendered by 
skilfully devised mechanical contrivances. 

In the agricultural districts cities would 
be built in which the farmers and their families 
would live and enjoy urban conveniences while 
they cultivated surrounding lands. Their plans 
indicate that all existing institutions and facili- 
ties would be razed to make place for the very 
much better and more efficient industrial sys- 
tem that socialists conceive. 

Presumably every one of these socialist 
writers has overlooked or ignored the fact 
that the creation of such conveniences, systems 
and establishments would represent the accumu- 
lation and expenditures in the United States 
alone of hundreds of billions of dollars, and 
that, if every able-bodied man and woman of 
the total population were to work 12 hours 
daily and be content with the bare necessities 
of life, more than 25 years would be needed 
to create the required amount of excess capital, 
to make and work out the plans and bring this 
ideal labor saving scheme to perfection. 

If socialists are sufficiently zealous for 
their ideal to undergo such privations for its 
realization one would expect them to take pos- 



96 Capitalism vs. Bolshevism 

session of some uncharted area in South Amer- 
ica or Africa and there create capital and build 
up a social and industrial system according to 
their own liking. 

Honest socialists have tried it repeatedly. 
In Paraguay a colony started with a vast area of 
exceptionally fertile land and an immense 
amount of money and failed in a surprisingly 
short period. Several of the individual mem- 
bers of that colony afterwards took up farms in 
the vicinity, bucked the game with capitalism 
and grew quite wealthy. 

Bolshevists and socialists have no ambition 
I to produce or create capital. It is their plan 
to take what others have produced and accumu- 
lated with the least possible risk to themselves. 
When the government robs the rich, the social- 
ists want to be the government. Thus they will 
be immune from arrest and punishment. They 
want to take over business successes, not fail- 
ures; crops that have been harvested, not 
ground to be cleared and planted; mines that 
are yielding riches, not those in which no ore 
was found. 

Do socialists dislike capitalism? Do they 
emigrate from Europe to any other than capi- 



Bolshevism 97 

talistic countries? Have you noted any gen- 
eral and growing exodus of socialists from this 
country bound for Russia? 

The progress of civilization has been re- 
tarded in all ages by the uncontrollable desire 
of many people to acquire capital without work- 
ing for and saving it. Socialism is the organr 
ized expression of such a desire. It is starving 
the aged people and babies of Russia today. If 
we arrest and imprison the man we find prowl- 
ing around at night with a kit of burglar's 
tools and carrying concealed weapons, why 
should we treat socialists and bolshevists differ- 
ently? 

The parlor socialist should not be permitted 
to deceive us with the claim that socialism is 
mild and generous, gentle and loving. Marx, 
Engles and all of the other patron saints of 
socialism not only have justified in their writ- 
ings but have specifically recommended every 
one of the outrages that now are being perpe- 
trated in Russia. Get their books and you will 
find it in cold type. 

Germany plunged into state socialism up 
to her neck. She owned the railroads, tele- 
graphs, telephones, many of the mines and in- 



98 Capitalism vs. Bolshevism 

numerable public utilities. From the moment 
she embarked upon that policy her government 
became more and more autocratic every day. 
The state was everything and the individual 
nothing. Even the socialists didn't like it and 
strove constantly to overthrow the government. 
That which has happened to Germany was 
largely the result of her flirtation with state 
socialism. 

Capitalism gives you an opportunity to 
make a success of your life in your own good 
way. It doesn't take you up and lug you ; and 
any system of society that does will carry you 
for the most part where you don't care to go. 
Socialism and paternalism are worse kinds of 
autocracy than the plain kind that travels under 
its right name. 



Chapter VIII 
DISCONTENT 

After all his arguments have been an- 
swered and all his theories demolished, the last 
question an academic socialist or bolshevist 
asks is: "How do you account for the discon- 
tent of the working classes and what will you 
do to relieve it?" 

No one will question that large numbers 
of wage earners are afflicted with the spirit 
of discontent. The numerous semi-revolu- 
tionary societies, made up largely of people of 
foreign birth or parentage, but containing a 
fair sprinkling of Americans, are proof of it. 
Other evidence is to be seen in labor parades 
and the banners carried, in frequent strikes and 
occasional riots, and in the big demand for so- 
cialist leaflets and yellow journals that malign 
and abuse the wealthy and successful. 

Monotony, mental idleness, misinforma- 



100 Capitalism vs. Bolshevism 

tion and neglected opportunities are to be 
blamed chiefly for this chronic discontent. 

Division of labor has been carried to the 
point where millions do the same things over 
and over again days, weeks and years. Since 
piece-work has been largely abolished it is 
monotonous drudgery and no longer a game. 
The employee sits or stands at his machine 
and does his work automatically, obliged to 
stay and go through those motions until clos- 
ing time and so on until pay day. No mental 
effort is called for, and his mind is idle, or oc- 
cupied with the things he read last night in 
Ratsbane's editorial column or heard an agita- 
tor say from a soap-box on the street corner. 

"The devil finds evil work for idle hands 
(and also for idle minds) to do." 

Both the academic and rough-neck social- 
ists, and bolshevists, and also many social 
science workers, teach these discontented people, 
through personal conversation, periodicals, tons 
of pamphlets and inexhaustible floods of ora- 
tory, that labor gets only 35% of the product of 
industry and that capital takes the other 65%. 
The iteration and reiteration of these figures, 
and the infrequency with which anybody takes 



Discontent 101 

the trouble to contradict them, finally cause 
them to be accepted as truth. 

The average workingman is not, of course, 
an expert at figures, and when he is shown gov- 
ernment documents which state that "value 
added by manufacture" is 35%, and annual 
reports of the corporation that employs him in 
which the item "wages paid" is about 35% of 
gross sales, he thinks he has seen double con- 
firmation and is convinced. 

Nobody ever takes the trouble to explain 
to working people that 90% or more of the 
cost of a manufacturer's raw materials, includ- 
ing cotton, wool, leather, metals, coal, oil and a 
hundred other things, is wages. 

"Value added by manufacture" is only 
the difference between the cost of the raw ma- 
terials and the finished products ready for sale. 
Out of this 35%, or it may be 70%, the manu- 
facturer pays for power, makes up his rent and 
taxes, provides for a great variety of supplies, 
for wear, accidents, depreciation and obsoles- 
cence, compensates the management, office and 
selling force, and endeavors to earn interest on 
the capital invested and a profit besides. He has 
a tremendous job on his hands whether he sue- 



102 Capitalism vs. Bolshevism 

ceeds or not ; but no"body seems to be interested 
in the reasons for the restless discontent of em- 
ployers. There is a foolish notion generally en- 
tertained that they are the happiest and most 
contented men in all the world, and that no mat- 
ter how badly they are treated they will keep 
coming in multitudes and investing their money. 

Neglected opportunities are responsible for 
more of the discontent that exists among work- 
ing people than anything else. As this is being 
written on Lincoln's birthday it seems fitting 
to draw a comparison. Whereas the young man 
of the present day who thinks he is bright 
spends his evenings standing on a soap-box dis- 
seminating misinformation, Lincoln spent his 
evenings sitting on a soap-box filling his own 
mind with reliable and useful information. 

The workingman of today has an incom- 
parably better opportunity to educate himself 
than Lincoln did. Lincoln walked many miles 
to borrow a book. Now there is a library and 
reading room almost on the next block, evening 
schools in nearly all the cities and innumerable 
other facilities for education. 

Ask the boss. He will tell you that he ex- 
periences the greatest difficulty in finding com- 



Discontent 103 

petent men for foremen and the higher and 
more responsible positions. A wage earner who 
studies the business in which he is employed, 
learns all he can from contact with the work 
and familiarizes himself with everything that 
has been printed in books, uses his evenings to 
get a good English and mathematical education, 
and adds to this a course in mechanics, engi- 
neering, chemstry or such other science as will 
help him in his chosen calling, is reasonably cer- 
tain to make a success. 

Workingmen used to do these things. Very 
few of them do so now. It is because the agita- 
tors and union leaders teach them that their 
position in life should be that of a discontented 
workman who antagonizes the employer and 
says disagreeable things about the boss after he 
passes and before he is out of hearing. Is it any 
wonder that men so lacking in sound judgment 
and so neglectful of their opportunities should 
be discontented? 

Style is responsible for much of the popu- 
lar discontent. The wives and daughters of the 
wealthy often carry their style campaigns much 
too far. While there is no question that every- 
body has a perfect right to spend his money 



104 Capitalism vs. Bolshevism 

as he likes, a right which should not be abridged, 
it hardly seems good diplomacy or religion to 
flaunt forever in the faces of our neighbors 
the fact that we are able to have things that 
are very much more costly than they can hope 
to have. None of us would think of such 
a thing as twitting another of his poverty. 
Don't we do it constantly in the realm of style? 

A diamond is merely a pretty and stylish 
gem. Possibly wealthy women don't realize 
that they are responsible for the fact that the 
wives of wage earners crave diamonds. Any 
diamond merchant will tell you that war wages 
created an unprecedented and overwhelming de- 
mand for $50 to $100 stones, that he sold more 
diamonds in 1918 than in any previous year. 
Folly, to be sure ; but it suggests the possibility 
that wants breed more discontent than do needs. 

The seller of wildcat stocks is a breeder of 
discontent. Wage earners buy tens of millions 
of his worthless pieces of paper every year. 
They have no way of discriminating between 
companies that are organized to engage legit- 
imately in business and those that are created 
simply that unscrupulous promoters may use 



Discontent 105 

their shares to separate people from their 
money. 

The leading banking and brokerage inter- 
ests should provide facilities to handle specu- 
lative and investment accounts for wage earn- 
ers. It is done abroad and can be here. It 
would be good business to help the man of small 
means to get a run for his money, to interest 
him in the shares and bonds of legitimate and 
honestly managed corporations. 

War savings stamps should be made the 
nucleus of a great thrift campaign. The wage 
earner should be taught the importance and the 
advantage of saving. He should be furnished 
with information as to what his money that 
he has deposited in the savings bank does to 
earn the interest that is paid him. 

It is a mistake to assume that the work- 
ingman is incapable of understanding the in- 
tricacies of business and finance. Given a 
chance, he will learn quickly. Nearly all of the 
ultra-conservative men are wage earners. Not 
a few of them are wage earners for no other 
reason than that they always have been too con- 
servative to take chances. 

The strongest impulse of the normal man is 



106 Capitalism vs. Bolshevism 

his ambition. Trade unionism teaches the 
worker to restrain it, to reduce his pace and de- 
mand a standard wage. Sooner or later the 
man's human nature must react in dissatisfac- 
tion. Man is created to strive competitively, as 
all other things having life are. Capitalism en- 
courages such competition. Organized labor 
discourages it, however, and short-sighted peo- 
ple blame capitalism for the dissatisfaction 
which this repression creates. 



Chapter IX 
PROFIT AND INTEREST 

Profit is the reward of those who take a 
chance and win — of those who stake their 
capital wisely, courageously and fortunately on 
the outcome of a business undertaking and stay 
with it until it is a success. It also is the re- 
ward of superior judgment, resourcefulness and 
efficiency. 

Interest is compensation for the use of cap- 
ital. It is the chief inducement which is held 
out to all classes of people to encourage them 
to strive, practice self-denial and save. 

Profits and interest, together with savings, 
make up the yearly crop of new capital, which 
in importance is second only to the food crop. 
Food keeps people alive, and the growing sup- 
ply of capital speeds them on their way to 
achievement, higher standards of living and the 
enjoyment of more leisure, comforts and pleas- 
ures. Capital is the foundation of practically 



108 Capitalism vs. Bolshevism 

all progress. Its steady accumulation and ef- 
ficient employment is tearing people away from 
savagery and poverty and steadily helping them 
up to a higher and better civilization. 

It is estimated that at least 90% of each 
year's crop of profits and interest is reinvested 
in industry where it serves and benefits the 
whole people. All that business men and in- 
vestors take is enough to defray their living- 
ing expenses and to pay for their luxuries and 
pleasures. If the rich lived like the working 
people and all the money they now spend for 
luxuries were divided, it would add only a few 
cents per day to the pay of the wage earners. 

If power-driven machinery, railroads, rail- 
ways, ships, modern homes and the multitude 
of other things that distinguish civilization 
from barbarism have made the world a better 
place to live in, profits, interest and savings 
must be given the credit for it. If the son of an 
American workingman enjoys greater and bet- 
ter opportunities than the son of a Chinee or 
an African savage, then we must thank capital- 
ism for increasing* the opportunities of the 
average man. 

Nobody ever thinks of a workingman as a 



Profit and Interest 109 

profit taker. Yet that portion of his wages 
above the amount required to pay for his bare 
living necessities clearly is profit. 

The difference between profit and interest 
is so little understood that it may be well to il- 
lustrate. If Brown & Smith, having $1,000,000, 
use this capital to engage in the shoe manufac- 
turing business and make $100,000 a year, what 
is their profit? 

Of course they are entitled to 6% interest 
on their capital, which would be $60,000. Is 
the remaining $40,000 profit, or is it the salary 
or wages of Mr. Smith and Mr. Brown? It is 
possible that either or both of them could have 
hired out for $20,000 a year. They unques- 
tionably could have invested their money at 
6% in a less hazardous business than shoe man- 
ufacturing. 

If we look further into the affairs of 
Brown & Smith we probably shall find that 
they operated the first year at a loss of $40,- 
000, broke even the second, made $30,000 the 
third, $60,000 the fourth, and that the $100,000 
was not realized until their fifth year in busi- 
ness. 

Are they not entitled to compound interest 



110 Capitalism vs. Bolshevism 

on their $1,000,000 of capital for the first three 
or four years, also on the $40,000 they lost while 
establishing themselves? If they add that loss 
and that compound interest to their capital, 
shall we say that they have watered their stock? 
Otherwise, it clearly appears that they still are 
"in the hole" at the end of five years. 

Suppose Brown & Smith had organized a 
corporation with their $1,000,000 of capital, 
drawn out their salaries each year and allowed 
the remainder of their income, both profit and 
interest, to go back into the business — for 
working capital, to pay for additional factory 
capacity, advertising, selling facilities, etc., — 
and at the end of 10 years had increased their 
investment thus to $3,000,000. If they then 
began paying dividends at the rate of 18% an- 
nually on their million dollar capitalization, they 
would be accused of making undue profits; 
wouldn't they? Yet 18% on their original cap- 
italization would be only 6% on the total amount 
invested in their business, or interest only, not 
profit at all. 

There are a lot of big corporations in this 
country whose remarkably high dividend rates 
are to be accounted for in this way. For many 



Profit and Interest 111 

years they put both interest and profits back 
into the business and never added the money 
thus invested to capitalization. If all net earn- 
ings had been paid out as interest and profits 
from the beginning and then used to finance ad- 
ditional corporations to engage in the same bus- 
iness, and owned by the same men, there would 
have been no comment, even though the aggre- 
gate dividends paid by the whole flock of cor- 
porations greatly exceeded the payments of the 
one which invited public condemnation by fail- 
ing to add a few ciphers to its capitalization. 

Another thing that is not understood gen- 
erally is how it is possible for the merchant who 
sells the same kind of goods at lower prices than 
his neighbor charges to make more money. 
Where there is sufficient patronage available a 
hustling merchant may get himself into a posi- 
tion of advantage by cutting his own profits in 
two. If he can turn his capital over five times 
a year, make 4% each time and earn 20%, he 
is better off than his competitor who does only 
twice as much gross business as he has capital, 
at a profit on each turn-over of 8%, and earns 
16% annually. Of course the latter must take 
from his customers on each individual sale 



112 Capitalism vs. Bolshevism 

double the amount of net profit that the former 
does. 

Nearly all big profits are matters of chance, 
almost of accident. In some unexpected devel- 
opment a corporation suddenly finds an im- 
mense demand either for its own goods or for 
something so closely related that its facilities 
lend themselves readily to its manufacture. 
As it often is expressed, "things break right" 
and an avalanche of profit comes sweeping 
down. 

There isn't a business manager or any 
other official who can estimate with any de- 
gree of accuracy in January what his corpo- 
ration's profits will be for the year. For illus- 
tration, The Federal Reserve Bank of New 
York, a government institution which is ex- 
pected to earn 7% or less, actually earned 
109% on its capital in 1918. It was a case of 
things happening to break right for that par- 
ticular bank that year. 

It is the greatest mistake imaginable for 
the government to attempt to regulate the 
profits of the business enterprises of its citi- 
zens. Regulation stunts the growth of busi- 
ness. By making enterprise less attractive it 



Profit and Interest 113 

tends to prevent the normal number of compet- 
itors from entering the field and thus brings 
into existence a sort of monopoly that cannot 
be controlled by law; because in this case the 
limitation of output which causes prices to 
advance to abnormally high levels is not the 
result of a trust agreement but of a fear which 
the government has created. 

Big profits encourage business expansion, 
which in itself is competition. They also sup- 
ply the capital to finance the expansion and 
competition. The money which started and 
built up most of the competitors of United 
States Steel, Standard Oil and many other 
highly successful corporations, was made up 
largely of their own dividends and of profits 
accruing through 'the appreciation in the 
prices of their shares. 

Everybody who is opposed to trusts and 
monopolies necessarily must be in favor of more 
industrial enterprises. As they increase in 
number they enlarge the volume of output 
and tend to cheapen the product. Of course 
they add greatly to the demand for labor and 
thus exert an influence to maintain or advance 
wages. Profit is the only thing that ever caused 



114 Capitalism vs. Bolshevism 

industrial upbuilding and expansion. When a 
big profit appears, it should be welcomed and 
applauded, because it invariably sets things 
in motion that are beneficial to all of the peo- 
ple. 



Chapter X 
THE CORPORATION 

Without going into history, attention will 
be given here to the industrial corporation, the 
form of stock company in which the public is 
intimately interested and with which it is 
most familiar. The corporation is a legalized 
entity by means of which many individuals can 
combine to finance and conduct a larger busi- 
ness undertaking than any one man or part- 
nership would care to engage in alone. 

Nearly all of the country's big industries 
have been developed and are owned by corpo- 
rations. Although condemned by agitators and 
heckled by cheap politicians, the corporation 
is the closest approach to democracy that so 
far has been found practicable in business. It 
opens up the opportunity to individuals of 
moderate means to participate in the upbuild- 
ing and to share in the profits of the largest 
and most successful industrial enterprises. 



116 Capitalism vs. Bolshevism 

That the people have availed themselves 
of such opportunities in a very large way is 
proved by the fact that approximately 135,000 
people own the stock of the American Tele-, 
phone company, while the Pennsylvania rail- 
road has 106,107 stockholders and the United 
States Steel corporation more than 100,000. It 
is conservatively estimated that at least 10,- 
000,000 people are owners, directly and indi- 
rectly, of this country's railroad, industrial and 
mining enterprises. The theory that they are 
owned in "Wall Street" is all wrong; Wall 
Street is only the principal one of three or four 
distributing centers for securities. 

With the exception of banking institutions 
nearly all corporations in this country are of 
limited liability. This means that the owner of 
their shares has no personal liability for the 
corporation's debts or acts beyond the amount 
of money he already has paid in. As a result a 
corporation must be made sufficiently strong 
financially to establish a credit of its own. Of 
course the limited liability feature adds to the 
investment attractiveness of corporation shares 
and thus facilitates the financing of enterprises. 

Although corporations cannot be arrested 



The Corporation 117 

and put in jail, or be hanged or electrocuted, it 
does not necessarily follow that they have any 
more rights under the law than the corner drug- 
gist or grocer. Every misdemeanor committed 
by a corporation readily can be traced to one of 
its officials or employees. Connection with the 
corporation in no way shields the individual 
from punishment. 

For the foregoing reason, and for many 
others, all of the business regulative legislation 
enacted in recent years was based on a miscon- 
ception. If there aren't enough criminal laws 
make more of them and use them to correct 
any and all of the abuses that grow up in the 
realm of corporate activities. Governmental 
regulation of corporations is the greatest mis- 
take imaginable, because it is costing the people 
millions in expenses and billions in restriction 
of industrial growth and business activity. 



Chapter XI 
WALL STREET 

The theory that profits represent just so 
much money or capital stolen from the public, 
and that corporations are organizations formed 
to facilitate such robbery, is responsible for the 
disposition to condemn Wall street and the stock 
exchanges. 

Jt has been shown already that if every 
service were rendered at cost there would be no 
surplus with which to extend and expand the 
country's industrial equipment and facilities, 
and that necessarily profits are used for this 
purpose to the great and lasting benefit of the 
whole community. 

New industries must be financed, and often 
it is desirable to expand those already estab- 
lished. 

The average person who makes profits or 



Wall Street 119 

saves from his income is not sufficiently well in- 
formed concerning the progress of industry, the 
development of operating efficiency, the growth 
of public needs and desires and the ability of in- 
dividuals to supply them, so that he is com- 
petent to invest his surplus wisely. It is great- 
ly to his advantage to be able to consult experts 
who devote their entire time to the study of 
values and also to have the benefit of a public 
market in which prices are made by competitive 
buying and selling. These are supplied by the 
big investment banking and underwriting firms, 
which have their headquarters in the financial 
centers, and by the stock exchanges. 

To make a success of the stock brokerage 
and investment business one must possess ex- 
ceptional ability and be scrupulously honest. He 
must be a most painstaking and tireless stu- 
dent of values, and have capital and the cour- 
age to risk it on the result of his investigations. 

The quite prevalent belief that under- 
writers and brokers float and recommend the 
purchase of those securities which yield them 
the largest profits and commissions is correct 
only so far as it applies to those fly-by-night 
promoters of wildcat companies whose busi- 



120 Capitalism vs. Bolshevism 

ness it is to prey upon people's ignorance by is- 
suing certificates of capitalization against im- 
practicable schemes and valueless properties 
and using them to obtain money under false pre- 
tences. 

Those underwriting bankers and brokers 
who are members of the leading exchanges and 
associations probably devote the greater por- 
tion of all their energies to the work of dis- 
couraging unwarranted financing and of pre- 
venting people with money from investing it un- 
wisely, and for such efforts they do not receive 
one cent of income. Their success depends 
wholly upon their ability to select good, sub- 
stantial and profitable enterprises into which 
their clients may put their money. The brokers 
and underwriters who fail to do this soon lose 
their clients, waste their capital resources and 
are forced to retire from business. 

A clientele that is making good profits, ob- 
taining regular interest payments and dividends 
on its investments, and whose securities are 
tending to appreciate, forms the best asset that 
an underwriting or brokerage firm possibly can 
possess. 

This fact, of course, is self-evident, and it is 



Wall Street 121 

a conclusive answer to the claims which fre- 
quently are made that some of our great under- 
writing firms have robbed the corporations for 
which they are the financial agents. It is the 
first requirement of the underwriting banking 
house that it will do everything within its pow- 
er to build up the earning capacity and to main- 
tain the stability of the enterprises behind the 
securities it sells. 

The underwriting bankers often perform a 
valuable public service by restraining the cor- 
porations they finance from making excessive 
issues of securities. Unless the corporation 
can show the underwriters conclusively that the 
new capital they wish to raise is needed and can 
be used profitably for the benefit of the com- 
pany, the underwriters refuse to market the 
proposed issue, and thus they exert an influence 
to prevent that over-expansion which would be 
dangerous. 

The stock exchanges, on which millions of 
shares and bonds are bought and sold daily, pro- 
vide open markets in which securities are ob« 
liged to stand upon their merits, If a company 
is not over-capitalized, is well managed and so 
conducted that it can meet and withstand com- 



122 Capitalism vs. Bolshevism 

petition, its securities advance and sell in some 
cases many times above par. 

If the stock exchanges were abolished cap- 
ital would be made less liquid and the great in- 
surance companies, for example, often would be 
unable to sell their investments and make 
prompt payments for heavy losses by the in- 
sured. 

Investors throughout the whole country 
would be deprived of that most valuable source 
of reliable information as to the market value 
of investments which is furnished them by the 
record of stock and bond transactions published 
daily in the press. 

There is no other line of business in which 
the commission charge is anything like as low 
as it is in stock and bond brokerage. The com- 
mission for buying and selling 100 shares of 
stock having a value of $1,000 to $20,000 is $25, 
and this charge is divided between the buyer 
and the seller. Real estate and commodity brok- 
ers charge many times this rate of commission 
for turning over property or commodities of 
equal value. 

It must be seen, therefore, that to abolish 
the stock exchanges would be to increase the ex- 



Wall Street 123 

pense and cost of buying and celling securities 
and tnat it would increase very greatly the op- 
portunities for the practice of fraud. 

Speculation is not to be deplored. It is prob- 
able that 90% of all the capital saved and invest- 
ed represents an effort on the part of the man 
who saves and invests to obtain profit through 
appreciation in value of the commodities, prop- 
erty or securities he buys. Speculation, there- 
fore, promotes saving and it is the most pow- 
erful of all agencies that operate to increase 
and expand industrial development. 

Thousands of people, yes, hundreds of 
thousands, own Standard Oil, Telephone, Cal- 
umet & Hecla, Utah Copper, Anaconda, 
United States Steel, American Tobacco, and 
other shares at present highly valuable, which 
they bought years ago at very low prices, and 
the price appreciation and dividends of which 
have made them comfortably rich. 

If these companies did not have many 
thousands of stockholders there might appear 
to be some real ground for the claims of so- 
cialistic reformers that the wealth of the coun- 
try is concentrated in a few hands. 

The stocks and bonds of the successful 



124 Capitalism vs. Bolshevism 

dividend paying corporations of this country 
are owned by between 8,000,000 and 10,000,000 
people, and 15,000,000 to 30,000,000 more indi- 
rectly are owners through their savings bank 
deposits and life insurance policies. 



Chapter XII 
MONEY 

Money is not capital; but gold, the cur- 
rency basis of all highly civilized nations, is. 
Money is the medium or instrument of ex- 
change, the certificate of capital delivered or 
service rendered. 

As paper notes and subsidiary currency 
are redeemable in gold, which is accepted at 
full and equal value in all of the world's mar- 
kets, money thereby is made a measure of 
value. Thus, we speak of a man being worth a 
million dollars, and the various departments of 
government assess taxes on the basis of money 
value. 

One of the most common mistakes of stu- 
dents of economics is to confound money with 
capital. The greenback agitation and later the 
free silver campaign both had this error for 
their basis. While they were being fought out 
the country lost billions through the partial 



126 Capitalism vs. Bolshevism 

prostration of business. Yet the advocates of 
those theories did some remarkably clear and 
accurate thinking, as precisely what they de- 
clared an increase in the money volume would 
do, an increase in the capital volume will do. 

If we were obliged to decide whether all 
the money in the United States, or foodstuffs, 
cotton, wool, leather and other capital goods 
of equal value, should be destroyed by fire or 
be lost in the ocean, we naturally would direct 
that the money be sacrificed and the capital 
saved. With all the money gone the people 
might find some way to get along; but with all 
of the capital wiped out substantially all of 
the people would die of hunger and exposure. 

By increasing the supply of money unduly 
its purchasing power is decreased. This causes 
both the cost and the price of everything to 
rise. It robs creditors, but brings about such 
disorganization of business that debtors rarely 
are benefited materially. We are experiencing 
such a condition now, there being about $56 per 
capita in circulation, as compared with $34 a 
dozen years ago. Cost of living is thought to be 
excessively high ; it has become necessary to ad- 
vance all fixed prices, including street-car fares ; 



Money 127 

there is a shortage of housing facilities and 
rents are rising, yet nobody will build, and the 
unemployment of labor is. increasing at an 
alarming rate. While these conditions are not 
due wholly to inflation of the currency, they ex- 
ist in spite of it. 

In periods of great industrial prosperity 
and business activity money moves about more 
rapidly and its functions are supplemented 
largely by credit. An immense volume of busi- 
ness can be conducted with a comparatively 
small amount of money, though the increasing 
payroll exerts a stronger influence than any 
other factor to make money scarce. 

Money panics have their origin in fear. 
There are so many people who cannot stand 
prosperity, who become envious of those who 
are alleged to be making large profits, that 
their agitation eggs the politicians on to take 
an attitude which threatens property rights. 
This shatters confidence, impairs credit, brings 
an undue strain to bear upon the money vol- 
ume and the panic follows. Money hoarding is 
as often a cause as a result of panics. 

Volumes have been written and more are 
being written to prove that gold is not a prop- 



128 Capitalism vs. Bolshevism 

er or a scientific basis for money. Undoubtedly 
it has its shortcomings like everything else that 
man has created; but who can demonstrate to 
all the people of the world that he has something 
better? There is nothing else that will be ac- 
cepted without question or demur in settlement 
of international trade balances. It will be neces- 
sary, therefore, to prove conclusively that gold 
is wholly unfit, and nobody seems able to find 
any more than inconsequential faults with it. 
Some years ago it was claimed that gold should 
be demonetized because there wasn't enough of 
it, more recently it has been condemned on the 
ground there is too much of it. 

Gold measures up more nearly to the ideal 
currency than anything else that so far has been 
suggested. It fits readily into international 
transactions, makes possible an exchange of 
products with every country and can be loaned 
or borrowed internationally when necessities 
arise. One of the many reasons why we should 
discontinue advocating the abandonment of the 
gold standard is the fact that the attempt to do 
it would bring about business unsettlement in 
every commercial center in the world, with in- 
calculable losses to industry and labor. 



Chapter XIII 
TAXATION 

The best interest of the people being served 
by the rapid growth and improvement of pro- 
ductive machinery and equipment it naturally 
follows that taxation should be so arranged as 
to bear lightly upon essential business enter- 
prises. Protective tariff taxation gives en- 
couragement to industry and therefore is of 
prime importance. Other taxes should be so 
laid as to quicken enterprise, strengthen in- 
vestment confidence and discourage too lavish 
expenditures for luxuries. 

Taxation of business profits, individual in- 
comes and inheritances is the worst system that 
possibly could be devised. These taxes are the 
very essence of socialism, as they penalize en- 
terprise, efficiency, resourcefulness and thrift, 
the idea upon which they are based being to 



130 Capitalism vs. Bolshevism 

take from those who have earned and accumu- 
lated for the benefit of those who have not. The 
progressive or graduated feature, by which pro- 
fits, incomes and inheritances pay higher per- 
centages of taxation proportionate to their size, 
is in effect a declaration to the business genius 
that the nation doesn't want him to continue 
striving after he has accumulated a modest 
competence. 

If we are interested in building up the 
country, ii we are capable of realizing that a 
great number and variety of industries having 
the most highly perfected equipment and best 
possible management are of immense advantage 
to the nation and its people, if it is our desire 
that America maintain the foremost position in- 
dustrially and continue to go ahead we should 
make sure that there is nothing in our system 
of taxation or in any of our other laws which 
is a threat to capital and business enterprise. 

The wonderful industrial advancement of 
the United States during the past 100 years was 
due to the unqualifiedly cordial recognition of 
the right of the individual to his property, the 
assurance that the government would police it, 
discountenance every move toward confiscation 



Taxation 131 

and give the owner the fullest latitude of free- 
dom in the use of his property. 

The several earlier amendments to the Con- 
stitution had in view the further recognition of 
the rights of the individual to his personal 
liberty and his property. Adoption of the prin- 
ciple of protection in the early tariff laws, for 
the avowed purpose of encouraging industrial 
development within the United States, was an- 
other act that conveyed to the capitalists of the 
whole world assurance that this was to be the 
best and safest country in which to invest in in- 
dustrial enterprises. By giving capital a square 
deal the industrial advancement of this country 
became so rapid as to astonish the world. 

Envy of financial and business success has 
impressed itself on our national legislation in 
recent years and has been especially noticeable 
in the changes made in taxation. The mistaken 
notion has prevailed that profit is something 
that is taken away from the public, withdrawn 
from industry and used exclusively for the ben- 
efit of the profit taker. There has been a most 
astonishing inability on the part of the peo- 
ple to understand and appreciate the vital 
necessity of business being profitable when 



132 Capitalism vs. Bolshevism 

properly conducted, and the highly important 
part that profits play in building up the coun- 
try's industries. Lack of this understanding 
was responsible for the amendment to the Con- 
stitution which made it legal to levy taxes on 
incomes. 

From the standpoint of practical economics 
the objection to taxation of incomes, profits and 
inheritances is that it cuts down severely the 
annual crop of new capital. By reducing the 
amount available each year for industrial ex* 
pansion and upbuilding the progress of the 
country is retarded to the disadvantage of all 
the people. Business is less brisk and the de- 
mand for labor smaller than it otherwise would 
be, and there is a diminishing increase in the 
ability to enlarge the nation's volume of pro- 
duction per capita. 

About one-half of the national expenses 
should be defrayed by taxes on imports. All 
of the additional revenue required should be 
raised by taxes on luxuries and pleasures. The 
rich man should pay a tax to the national gov- 
ernment on his palatial residence, his automo- 
biles, yachts, expensive raiment, jewels, rugs 
and pictures. In exactly the same proportion 



Taxation 133 

the poorer people should be taxed on theatre 
and show tickets and all the other luxuries and 
expensive pleasures in which they indulge. 
The effect of this would be to relieve essential 
industries of the greater portion of their bur- 
den of taxation and thereby to reduce the cosf 
of living of those unable to indulge in luxuries. 

It is desirable that all classes of people 
be requiied to pay a portion of the taxes re- 
quired to support the national government, to 
the end that every citizen may be interested in 
curbing wasteful governmental expenditures. 
In recent years the government of the United 
States has grown to tremendous proportions, 
and tens of thousands of employees are sup- 
ported now that contribute nothing to the gen- 
eral welfare. They are a burden upon indus- 
try. The high cost of government is an im- 
portant factor in the high cost of living. 

Ability to get into office by railing against 
the rich and ability to retain office by perse- 
cuting big and successful business enterprises 
is building up in this country a political caste 
which is more dangerous even than a military 
caste. It fattens upon the excessives taxation 
of the industries that are the backbone of the 



134 Capitalism vs. Bolshevism 

country's greatness, and by its pernicious ac- 
tivities it is exerting an influence to drive 
American capital and business genius to for- 
eign lands. 



Chapter Xiy 
LUXURIES 

In a preceding chapter it was pointed out 
that previous to the great war capitalism had 
developed a condition in this country that made 
a quite general indulgence in luxuries of 
considerable economic value. Approximately 
two-fifths of the working people were em- 
ployed in the production and distribution of 
luxuries, including entertainments and pleas- 
ures, and the great bulk of their output was 
absorbed by the wage earners and farmers. 

The deluge of luxuries with which the 
country was then being visited frightened 
many economists, and undoubtedly was largely 
responsible for the 'advancing cost of living ; 
but it nevertheless gave industry balance, pre- 
vented an overproduction of the essential 
things, created a home market for all domestic 
products, made the work of building up for- 
eign markets unnecessary, and kept labor con- 



136 Capitalism vs. Bolshevism 

stantly employed while it was enjoying a higher 
standard of living than wage earners ever did 
anywhere else in the world. 

Labor's millenium was arriving; but the 
the working people didn't recognize it, and al- 
lowed themselves to be enticed away to the 
worship of false gods. Too many of them gave 
their votes to the free trade party, which 
opened the country's markets to the products 
of foreign cheap labor, and early in 1914 ap- 
proximately 3,000,000 wage earners were 
walking the streets in search of the employ- 
ment that they had voted away. 

The future undoubtedly will demonstrate 
that American workingmen possess sufficient 
brains so that they comprehend fully the les- 
son of 1914. If their prejudice against capit- 
alism can be removed and they will see to it 
that the government lets business alone, ceases 
to hector, heckle and regulate it politically, 
thus making the United States the most attract- 
ive of all countries to the investors, manufac- 
turers and merchants of the world, the work- 
ing people again will be able to enjoy continu- 
ous employment and to indulge in luxuries to 
a greater extent than ever. 



Luxuries 137 

No one, of course, should make the mis- 
take of thinking he is contributing to the pub- 
lic welfare when he plunges into the luxury 
habit beyond his depth. There always is a 
grave danger of spending too much of the an- 
nual income for luxuries. This applies to the 
government, the nation as a whole and the in- 
dividual. A constantly growing volume of es- 
sentials production always is of first import- 
ance. Therefore it is the duty of every Ameri- 
can to save a portion of his income every year 
and bank or invest it, as it never ceases to be 
necessary to add something more to the fund 
that increases and improves the country's in- 
dustrial machinery, transportation equipment 
and housing facilities. Nobody, therefore, 
should buy luxuries on the installment plan or 
devote his entire surplus earnings to pleasures. 

It must be understood that the popular 
enjoyment of luxuries depends upon and is 
regulated by the country's volume of produc- 
tion. There always is more danger of under- 
production than of overproduction. A surplus 
can be sold abroad with gain, but a shortage 
makes prices high and necessitates purchases 
abroad with resulting loss of national capital. 



138 Capitalism vs. Bolshevism 

An excessive indulgence in luxuries draws 
too many workers away from the ranks of the 
necessity producers and tends to bring about 
a sharp advance in the cost of living. This 
condition is corrected in time, however, by the 
law of demand and supply reducing the num- 
ber of jobs in luxury lines and increasing the 
call for workers from the producers of necess- 
ities. 

It should require no extraordinary intel- 
ligence to understand and appreciate that re- 
ductions in the hours of work necessarily must 
restrict the working people to some extent in 
their enjoyment of luxuries. Loafing on the 
job and strikes have the same effect. Things 
must be produced or the public cannot have 
them. As necessities come first, everything 
that decreases or restricts the volume of out* 
put increases the number of workers that must 
be employed in the production and distribution 
of necessities and thereby reduces the size of 
the army that provides us with luxuries, com- 
forts and pleasures. 

In this time and country of machine pro- 
duction, when nearly all of the heavy work is 
done by mechanical power, nine hours* em- 



Luxuries 139 

ployment daily is not unduly exhausting. A 
few generations back, when there was no pow- 
er but muscle, our ancestors worked 12 and 14 
hours, sometimes longer, and grew stronger 
rather than weaker as a result. Not having 
capitalism to help them the workers were 
obliged to put in eight or nine hours daily to 
provide the family with food alone. They had 
to work to live. 

Why don't the workers of the present, in- 
stead of demanding an eight-hour day, consent 
to work nine hours for 49 or 50 weeks, having 
an agreement with their employers that they 
may have two or three weeks' vacation each year 
without losing their jobs? Such an arrange- 
ment would enable them to have a very great 
deal more fun; and the employers probably 
could be induced to offer a bonus for contin- 
uous service during the remainder of the year, 
which would be striven for as an additional 
vacation fund. 

It is highly desirable that American work- 
ingmen understand that the wage earners of 
other countries cannot hope to enjoy, for a very 
great many years to come, more than a very 
small proportion of the luxuries that even the 



140 Capitalism vs. Bolshevism 

poorer paid people do in this country. Capital- 
ism hasn't yet increased their productive capac- 
ity sufficiently to make the American standard 
of living possible. They simply can't produce 
as much per capita as we consume. 

A physician who recently returned from 
a long perod of service in the warring areas 
says: 'There may be a place in Europe where 
the wage earners live in modern dwellings, 
equipped with running water, baths, set tubs, 
heating plants, electric lights and gas, and con- 
taining comfortable furniture, books and pic- 
tures; where their children are well dressed 
and sent to school until they are 16 or 17 years 
old before going to work, and where the fami- 
lies of the working people have a fairly good 
surplus with which to enjoy themselves; but if 
there is such a place I failed to find it or hear 
of it in all my travels." 

An American citizen who, after traveling 
extensively in Russia, returned to this coun- 
try as an agent of the bolsheviki, told a con- 
gressional committee before whom he was tes- 
tifying that the Russian workmen and peas- 
ants found "it quite difficult to believe the large 
and fancy tales that we foreigners came to tell 



Luxuries 141 

them." By "fancy tales" he referred to the de- 
scriptions given of the way the working people 
live in the United States. And he, being a so- 
cialist, had returned to help destroy the capit- 
alism that makes it possible for the working 
people of America to enjoy the luxuries that 
they do. 

Luxuries are not the product of labor or- 
ganizations, proclamations, resolutions, peti- 
tions, parades or social uplift legislation. Huge 
amounts of capital must be created, saved, ac- 
cumulated and set at work efficiently by capit- 
alism before luxuries possibly can be brought 
within the reach of the working people. Noth- 
ing else ever did or ever can create this much 
to be desired condition of society. 

We have it in America. It is the birthright 
of American citizens. Shall we keep and guard 
and nourish it ? Or shall we permit a lot of im- 
ported agitators to destroy it with their prop- 
aganda ? 

Envy of those who have more than we do, 
who apparently strive less and live better, is the 
spark which these propagandists of destruc- 
tion hope to fan into a flame that will reduce 
our highly developed industrial civilization to 



142 Capitalism vs. Bolshevism 

ashes. Therefore, we must learn to subdue our 
envy, and it will be easy to do this if we keep 
in mind the fact that the greater the activity, 
progress and success of capitalism the more 
there will be for ourselves, our wives and our 
children. It needs no argument to support this 
statement. Those of us who are not blind can 
look about us and see it on every hand. 



Chapter XV 
OUR OPPORTUNITY 

In the foregoing chapters it has been 
sought to establish the fact clearly that the ma- 
terial welfare and happiness of the people de- 
pend first of all upon production. High wages, 
short work-days and old-age pensions are de- 
lusions. The workers never can be well off ex- 
cept when the volume of production is large 
enough to supply in full the wants and reason- 
able desires of all the people. 

When productive capacity is being opera- 
ted continuously throughout the country capit- 
alism is well pleased to accept a narrow margin 
of profit. It, indeed, is obliged to, as under 
such conditions strenuous efforts must be made 
to induce the public to come into the markets 
and purchase the enormous volume of product. 



144 Capitalism vs. Bolshevism 

Every producer then must strive to deliver his 
product to the manufacturer or merchant in 
such condition that it cannot fail to give sat- 
isfaction, and the success of the individual man- 
ufacturer and merchant depends upon abilty 
to please the consumer. 

Operating under the conditions described 
the greater number of corporations can turn 
their working capital over several times each 
year, and, though making only two or three 
cents on each dollar of product, earn a satis- 
factory return on their property investments. 
The income of the wage worker is much larger, 
because it is continuous, and it then has a max- 
imum of purchasing power. 

We Americans have an opportunity that 
is better than the like one possessed by all oth- 
er peoples, because ours is incomparably near- 
er at hand. The people of practically all other 
countries must strive and save for years if not 
generations to come to accumulate capital and 
put it at work effectively before they can raise 
themselves to our standard of living. Our pred- 
ecessors have done this for us and we should 
be endeavoring to hand down to our children a 
far greater heritage than we received. Our 



Our Opportunity 145 

opportunity is in our ability to clear away the 
many obstacles that heretofore have prevented 
our capitalism from doing as much as it might 
do for the present and coming generations. 

Everything that interrupts or restrains 
the proper and legitimate activities of capital- 
ism tends to restrict the volume of production, 
and by so doing increases labor's number of in- 
comeless days and adds to the general cost of 
living. 

Therefore we should set our faces stern- 
ly against bolshevism, I. W. W.-ism, socialism, 
strikes, free trade, all of the many varieties 
of experimental reform legislation and every 
tendency that may develop on the part of the 
government to engage directly or indirectly in 
business, or to interfere, except by way of en- 
forcing criminal laws, with the industrial en- 
terprises conducted by its citizens. 

If business could be permitted to go ahead 
unrestrained and unhindered all classes of peo- 
ple in this country soon would be enjoying far 
greater prosperity than they did during the 
war or in any preceding period, and there is 
no reason to doubt that it could be made con- 
tinuous. The farms, mines and factories can 



146 Capitalism vs. Bolshevism 

be increased in productive capacity and a mar- 
ket for their output developed here among our 
own people. We shall need to export only 
enough to pay for the things we import, like tea, 
coffee and silks. With such a volume of produc- 
tion there will be much more for all of us and 
we necessarily shall have the purchasing power 
to absorb the product. 

It is essential, however, that we exercise a 
jealous care for this capitalism which has made 
Americans the best fed, clothed and housed, the 
most independent, happy and luxury-enjoying 
people in all the world. Impoverished govern- 
ments and bolshevist agitators everywhere are 
directing the attention of their people to the 
United States and telling them over and over 
again that it is the richest country in the world. 
Propagandists are among us now, and they have 
been kept here for many years past, advocat- 
ing all sorts of changes ana* reforms which they 
believe will weaken us or direct our powers to 
our own destruction. 

Shall we hold fast to those things which we 
have tried 2nd found good, to the republic and 
the policies that have made us the greatest and 
most prosperous of all peoples, or shall we con- 

LRBAo!19 



Our Opportunity 147 

sent to listen to quack economists and charla- 
tans and at their behest fall down and worship 
new and unknown gods? 

THE END. 



